It’s hard to believe it has been 2 years since the Covid-19 pandemic began. So much has changed in this time in all aspects of our lives, not least in our personal finances. There’s been a lot of Covid personal finance changes.

The changes have not just been personal either. This post will cover five major changes which have impacted the whole landscape of personal finance. While these trends may not all impact you directly, it’s important to understand them as they may influence regulation, companies’ behaviours and trends, and your own decision making in the future.

The five personal finance changes I’ll be covering in this post are as follows:

1. The rise of the retail investor
2. Investors are showing more love for UK stocks
3. Bitcoin’s rollercoaster ride
4. We return to borrowing again
5. Real wages are falling at a time of high inflation

1. The rise of the retail investor

Retail investing has taken off with a boom.

Many were able to increase their savings during the various lockdowns and decided to invest this money.

This surge in activity was partly promoted the stock market turmoil in the pandemic’s early days and the subsequent euphoria which followed various breakthroughs.

Now, more and more people are investing, which is great news!

2. Investors are showing more love for UK stocks

UK-based investors have been moving towards UK stocks once more.

Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, explained: “The FTSE All Share has regained a vibrancy that was lacking prior to the pandemic, with a pallid tone having blighted the index due to worries about Brexit.”

“Shaking off the double shackles of Covid-19 and Brexit hasn’t been without its setbacks, while new variants have emerged, and extra trade red tape has proved onerous for many importers and exporters.

“The index has headed higher on a meandering trajectory, with investors overall showing a lot more love for UK stocks.”

Some sectors are still struggling, however. The shock of the conflict in Ukraine has caused volatility and fresh disruption for airlines, which had already been finding it difficult.

The valuation of British Airways owner International Consolidated Airlines group is currently 67% below pre-pandemic levels.

3. Bitcoin’s rollercoaster ride

I try and avoid speaking about cryptocurrencies on this blog. They are unpredictable and are much more like gambling than investments, so I don’t feel comfortable at this stage speaking about them. I do expect that will change in time.

However, you can’t miss the rollercoaster ride Bitcoin has been on during Covid-19.

It has experienced a spectacular rise but two dramatic drops as a flood of crypto speculators piled into the currency hoping to catch a ride upwards, with many caught out by the volatility of the asset.

The currency is still 606% higher than the start of the pandemic, helped by more interest from large institutions.

However, in recent weeks, the Russian invasion of Ukraine has proven that Bitcoin is unlikely to be the “digital gold” many crypto fans had hoped. Its performance has not lived up to these expectations at all.

Meanwhile, the pile on of speculators into the crypto wild west has led to a surge of holdings of higher risk investments since the start of the crisis.

The FCA has estimated that a million UK adults, 6% of all UK investors, increased their holdings in high-risk products or bought new high-risk assets during the first 7 months of the pandemic.

With the cost-of-living squeeze intensifying, this is very worrying. Consumers should be focusing  consumers on creating a resilient pile of savings and lower risk investments they can fall back on if necessary.

4. We return to borrowing again

After almost a decade of rising unsecured consumer debts, we started paying them back at the start of this pandemic. This was a really positive step, as the UK has been crippled by a debt problem for a long time.

The trend stuck for each lockdown, but was most striking during the early months of the pandemic, including April 2020, when UK adults repaid a total of £7.34 billion in consumer debt.

This was certainly helped by it becoming incredibly difficult to spend money.

However, aside from a blip in September last year, for the past 12 months, borrowing has been rising again each month, as life has returned closer to normal with each month.

Positively, we are still adding less to the large pile of debt than we were each month before the pandemic. Sadly, this might not stay the case for much longer. The monthly sum is growing steadily.

As prices rise and wages fall further behind inflation, there’s a risk that we’ll see borrowing accelerate far beyond pre-pandemic months.

5. Real wages are falling at a time of high inflation

And finally, we have found ourselves in the middle of a cost of living crisis.

Pay figures were all over the place during the start of the pandemic.

Early on, the number of people losing substantial portions of their work, and the number on furlough, meant that pay was down 1.3% from a year earlier.

This meant the subsequent rises seemed much more dramatic – at 8.8%.

However, looking at the average wage, although there have been significant bumps along the way, it has trended gradually upwards during the pandemic.

Unfortunately, now real pay – after inflation – is falling.

In the three months from November 2021 to January 2022, after inflation, total pay is up 0.1%, but regular pay is down 1%. Regular pay excludes reimbursement via structures like bonuses.

Inflation over these three months averaged 4.8%, for reference.  

Sarah Coles, a senior personal finance analyst, at Hargreaves Lansdown, warned: “Falling real wages at a time of rising inflation and enormous pressure on the cost of essentials is going to put huge pressure on those whose finances were already close to the edge.”

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