How has Covid-19 impacted on your financial health?

We may all have been in the pandemic together for the past two years, but how it has impacted on us has varied depending on a variety of factors including age, pre-existing health, and our sector of employment. It has also taken a varying toll on our finances.

"People employed in certain sectors, such as hospitality, will likely have seen their incomes fall significantly during the pandemic. While Government supports like the PUP payment were welcome, such supports won't have replaced all pre-pandemic income for workers in impacted industries," says John Alford, workplace financial planning lead at Irish Life.

“The key for this group, as things hopefully return to normal in terms of their earnings, is to look at any short-term debt they may have built up during the pandemic first before then re-examining some of their longer-term financial goals such as ensuring themselves and their families are financially protected from ‘what-if scenarios’, planning for retirement, and building up savings.”

On the other hand a sizeable cohort has benefited financially. "Last year's record tax figures bear that out. Any amount of money has been saved, as well as spent on home renovations and cars," says Tony Delaney of Sys Group, a financial planning specialist.

For many people the pandemic meant a switch to working from home. “Work-related expenses like commuting and discretionary expenses like socialising, dining out and holidaying have reduced, meaning this cohort has ended up with more money in their pockets than pre-pandemic,” says Alford.

Household deposits

Central Bank figures last August showed household deposits at €134 billion, up more than €20 billion since the start of the pandemic.

For this cohort, what to do with those savings is now occupying thoughts. “It’s one thing creating wealth; you’ve got to protect it too,” says Delaney.

The return of inflation is focusing minds too. “It’s important that people understand the risk inflation poses to the real spending power of money,” says Alford, who says those sitting on higher-than-expected sums on deposit are now considering whether that excess money could work harder for them in the longer term by being invested.

There are plenty of options available for people interested in cultivating a nest egg, but it’s important to know what you are getting into by ascertaining the level of investment risk involved, that is, how likely the investment might be to rise or fall in value, he says.

“Taking an element of risk by investing in an asset that could rise or fall in value, such as the stock market or the property market, isn’t necessarily a bad thing because it generally means the potential upside of such an investment is quite high, and the longer you’re willing to invest, the more likely it is that you’ll see a positive return on your investment,” he points out.

Find out about charges, which can have an impact on how much your nest egg is worth when you come to access it, and if there are any minimum periods money needs to be invested for or any restrictions around accessing it in time.

‘Financial awareness’

“Good tips to start the year right when it comes to managing your finances include increasing your level of financial awareness and knowledge. That doesn’t necessarily mean knowing exactly what a tracker mortgage is, but it does mean knowing how much money you’re earning each month and where you’re spending that money,” says Alford.

Set financial goals. “Have short, medium and long-term financial goals for the future so that you’re clear in your own mind as to what you’d like to achieve with your money – from getting out of your overdraft to getting a deposit for a house together to funding kids’ education costs or, down the line, buying that yacht,” he continues.

Next, figure out the actions necessary to achieve them, whether to reduce spending, increase saving, invest, start a pension or avail of more financial protection.

Some who went into the pandemic in financial difficulty may be coming out of it a little better off.

“In some cases we are getting calls from clients we’ve had down through the years who now find they have a little more in their bank account each month and are asking what they should do about it, maybe look to pay down debt,” says Karl Cronin, North Connacht and Ulster regional manager for Mabs, the State’s Money Advice and Budgeting Service.

In such cases he encourages people to take their time to assess the real change to their income and outgoings. “In many cases, while commuting costs have gone down, food and other costs, such as energy, will have gone up,” he points out.

Existing debts

Mabs also helps people who, because they went on the Pandemic Unemployment Payment, could no longer afford to meet existing debts such as mortgages. It provides tools to help them negotiate alternative arrangements, in some cases stepping in to act as a third-party intermediary on their behalf.

“Mabs is a very trusted organisation among creditors. They refer to us as the honest broker and are very good at accepting our proposals,” he says.

For anyone coming out of the pandemic in poorer financial health than they went into it, Mabs is an invaluable resource. “From the feedback we get people tell us they can see a light at the end of the tunnel, a weight is lifted off their shoulders. It’s really heartening for us to see that. Because we do this day in, day out, we can see the impact prolonged difficult debt issues can have on people’s mental and physical health,” says Cronin.

"In Ireland, there is still a stigma about debt, we don't talk about it. Our service is free, confidential and independent."