Budget changes after Covid wrecked havoc on my salary

One of the negatives of the coronavirus pandemic is the obvious economic impact. Some people experience it more than others and for a lower middle-classer such as myself the change is most pronounced in my salary being cut by 20% and a move to work from home instead of an office.

Here’s what changed

My income. From bringing home just over £3k a month, I am now coming home with less than £2,500. It might not seem much at a glance, but in net terms this is a loss of £11,000 per year. And in a city as expensive as London…this money goes a long way.

My workplace pension contribution. This topic seems a little neglected, at least in my current environment. However, it’s important to understand that if your salary is going down, so will your workplace pension contributions and the less you pay in, the smaller your pension income once you retire. I used moneyadviceservice.org.uk pension calculator and in accordance to my contributions I’d be receiving £10,860 per year with current level of contributions. With my previous one I’d be receiving a much happier £12,865. And while a mere £2k doesn’t seem to make a huge difference to most people, to a retiree this is 2 months worth of expenses. However, which.co.uk indicates the bare minimum retirement cost of life to sit at £12,532 making the additional £2k rather essential. Pensions are really difficult right now – some employers are suspending the scheme based on terrible financial shape they’re in, in other companies employees are stopping contributions and asking for taxes cash instead (don’t do that if you can avoid it).

Commute. Dropped to £0 in the last few months, however this cost is unlikely to stay at nothing for much longer. Although the salaries have not recovered, more companies are starting to call on their employees to show their faces in the office from time to time. To get me anywhere near where the office is located will set me back by £4.30 each way in peak hours or £3.20 off-peak. In my case this expense is not reimbursable.

Groceries. Initially my grocery bill increased by close to 60%. However, it has now stabilised and regularly we spend 35% more than we used to, even though we no longer work on building up a pantry. The increase is caused by three things: we get our food delivered from Asda instead of buying it from Aldi, we now eat all of our meals at home and over the last few months food prices have increased. Even though the statistics indicate low inflation, in terms of cost of produce and foodstuffs the official number is skewed by other markers showing lower increase of even decrease in costs.

Electricity. We’re at home all the time. More appliances are on with two fully set up workstations running, me drinking 10 cups of hot water with lemon per day, dishwasher running daily instead of every other day and weirdly laundry happening more often too. Our electricity cost has risen by around 10% – I’ve managed to offset some of that expense by switching us to a more affordable supplier (Bulb, not sponsored).

Entertainment. As mentioned, we don’t go out much anymore. If we do, we’ll use First Table to get 50% off our meal (not sponsored). We did however pick up a Prime subscription for £79 per year. Aside from this we also have a Netflix account which my partner’s parents are paying for and which remained unchanged. I have also been buying higher volume of books and it appears their prices have gone up in recent months – my average spend has increased from maybe £5 a quarter to £25-£30 per month.

Saving rates. In March this year Bank of England revised the interest rates from 0.75% to 0.25% and then again to 0.10%. If you are paying a tracker mortgage, this is a great news. If you are saving money, this is a disaster. This is a common tactic to convince savers to spend their money instead as it withers away slowly otherwise. However, the millennials decided to turn from savings to investments and I’m no different – the only ‘savings’ I have are my emergency and sinking funds. All money which I don’t need right now is invested.

Here’s what stayed the same

Mortgage. Despite the change in rates, my mortgage is ‘fixed’ for another 18 months. This means that whatever Bank of England does is not reflected in my housing costs. I am also not eligible for Covid-related payment holidays unless I lose my job completely.

Internet. This has been a problem for many remote workers. I luckily upgraded to fibre broadband in mid-February and didn’t need to increase the capacity of my line as I moved to homeworking. My bill remains at just over £25.

Council tax. As if Croydon ever showed any understanding for it’s residents. (I have no love for my local council).

Gas. Despite two humans and two cats being at home always, the cost of gas has not increased for us. This is likely because we have not had the need to use the heating much with the summer being warm and the beginning of Autumn also pleasant.

Water. If your supply is metered, the chances are your bill would have increased. My property is using ‘assessed charge’ because the configuration makes it impossible to install a meter resulting in the fee being unchanged.

Mobile phone. My partner’s phone bill decreased as he cancelled his data package, however in my case it remained as it was (I use data whenever out of the house). At a whooping £12 I can make my peace with it though.

What changes in your budget have been caused by Covid?

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