Are you recession ready?

We understand news of a recession can be scary and stressful so have outlined practical tips below to help you prepare. We also want to help you avoid rash decisions that can harm your long term financial health.

Have you cut back on unnecessary spending?
Money often “leaks out” of our accounts on unnecessary or luxury items without us really being aware and this can really add up over time! A simple way to learn where your money is going is to print out the last couple of months bank statements, then use different colour highlighter pens to identify spending that you can reduce or stop. The goal here is to make conscious spending decisions and stop spending on things that don’t really make you happy.

Is paying off high-interest debt your priority?
Higher interest debt such as credit cards, hire purchase, or personal loans really “suck” up your income making it hard to get ahead . Work out which debts have the highest interest then talk to the lender about options for early repayments and any costs involved. Then make it a priority to pay down what you can as fast as possible and do all you can to avoid more short term debt.

Have you got a “rainy day” fund ready?
Having a decent amount of savings in the bank is a major stress reliever and helps to avoid going into expensive debt for unexpected spending such as dental work or car repairs. We recommend aiming for 1-3 months take-home pay although any amount is better than none. Great ways to build up your rainy day fund include setting up an automatic payment into a separate savings account, and selling all that stuff around your house you don’t really need or use.

Is your mortgage coming off a low fixed interest rate?
Work out what you will likely pay in the future using a mortgage calculator then start putting aside the difference from your current payments into a savings account. This will help to adjust your household spending down in advance and also put some money aside to help make future payments. If you think it’s still going to be a struggle to make the higher payments then talk to your bank or mortgage broker early about options such as temporary interest only payments.

Are you in a secure job and maximising your income?
Employee layoffs and company cost-cutting measures are more likely during a recession, especially for companies selling non-essential products and services. Make sure your résumé is sharp and updated,” and if you don’t have job security then work on a Plan B for employment. If you currently have some spare time, then consider if there is a “side hustle” that works for you and stash the cash into your rainy day fund.

Are you already struggling to make ends meet?
If you are doing it tough, remember that while things might be challenging right now, eventually the pendulum will swing the other way. Remember that markets fluctuate and undergo cycles so don’t stay down forever. MoneyTalks (0800 345 123) offers a free service for those needing help with day-to-day money matters such as managing debt or budgeting.