In these uncertain times, it’s more important than ever to make sure your finances are in order. The Bank of England believes that a painful squeeze on our living standards, driven, primarily, by soaring energy prices, is set to intensify and will push the UK economy into recession later this year.
Making your finances recession-proof is all about taking practical steps to ensure your money is working hard for you. It is vital to be completely honest with yourself about your financial situation.
By conducting a thorough audit of your finances and gaining a comprehensive understanding of all your incomes and outgoings, this will show you exactly where your cash is going and, most importantly, help you identify problematic spending behaviour.
Here are 10 tips to help you recession-proof your finances:
1. Make a budget and stick to it. This will help you keep track of your spending and ensure that you’re not overspending.
2. Save, save, save! Try to put away as much money as you can into savings account so that you have a cushion in case of tough times.
3. Invest in yourself. Take the time to learn new skills or improve upon existing ones. This will make you more valuable in the job market if you need to make a job or career change.
4. Remove any unnecessary payments. Look at your bank account and remove any pain-free direct debits. Consider if you’re currently paying for things you don’t really need, for example subscriptions.
5. Time to switch. Look at energy tariffs, home insurance, car insurance, broadband, TV package, mobile tariff – now might be a good time to switch.
6. Stay disciplined with your debt. Make sure you’re making all of your payments on time and in full. This will help you avoid costly late fees and keep your credit in good shape.
7. Pay off high interest. Prioritise any high-interest debt, such as credit card debt, freeing up more money in your budget to cover other expenses if your income decreases.
8. Have an emergency fund. This is a must in case you lose your job or have any unexpected expenses. Try to save up at least between 3 to 6 months’ worth of living expenses so that you’re expenditure is covered.
9. Diversify your Income. Don’t put all your eggs in one basket. Having multiple streams of income can really help. If one income source starts to dwindle – or gets eliminated completely – this will provide other sources to fall back on.
10. Diversify your investments. In addition to diversifying your income, it’s also important to diversify your investments. Review your investment portfolio and make sure your investments are spread across different industries and even different types of asset classes.