Preparing for a recession can sound daunting. However, it doesn’t need to be a worrying time if you can get a plan in place. Of course, it can cause uncertainty around jobs and livelihoods, but with a financial cushion, it can help reduce stress and alleviate some pressure.
In this article, we’re going to reveal some ways you can become ‘recession ready’.
Have a savings account
You know that saying ‘saving for a rainy day’? Well, a recession is where that rainy-day fund will come in handy. According to research, almost three million people are one paycheck away from losing their home.
Millions are living month-to-month with no savings stored away. Now, we understand that putting lump sums away each month can be difficult for some people, but there are some clever initiatives which can be implemented to help.
For example, save the pennies or roundups (banks have different names for them) is an automatic savings scheme where the bank will round up your spending to the nearest pound, putting the pennies in a separate account to save.
This means that if you spend £10.01 on petrol, the bank will put 99p into savings. If you go into your overdraft, it will stop moving the pennies. Remember, look after the pennies and the pounds look after themselves.
Once you’ve got your savings under control, it’s time to look at your borrowing. This isn’t just loans or credit cards, it’s also any items you have on finance or ‘buy now, pay later’. Thanks to online shopping, it has never been easier to select this option, but as tempting as it sounds, it can soon spiral. It’s becoming one of the fastest-growing payment methods in the country – growing at a rate of 39% a year.
In fact, 9.5 million Brits said they avoid making purchases from retailers which don’t offer this method of payment. Not all buy now pay later options are interest-free, and if you fail to make a payment, there can be serious consequences. Reducing borrowing can reduce spending, lessen the risk of missing a payment and give you more opportunity to save.
As well as reducing borrowing, you should also consider cutting unnecessary spending. Do you need the latest phone, all of the streaming subscriptions and satellite TV? These costs soon add up.
Instead, why don’t you choose between Netflix, Prime Video or Disney+ rather than having multiple? Why not opt for a sim-only contract and save money on your phone. When you plan cost-cutting, be sure to only cut or reduce non-essentials.
Pay high-interest accounts first
If you have borrowed money, have credit cards or things on finance, check all of the interest rates. Let’s take credit cards as an example. If you have one credit card which has a high-interest rate and another which is 24 months interest-free, make minimum payments on the interest-free one while you clear the other. This will save you money by allowing you to pay the card balance rather than the interest.
Find ways to make extra money
Topping up the savings fund and making a bit of extra cash can help give you a little boost. There are some simple and effective ways you can make money from home, such as selling unwanted items, utilising cashback, completing surveys and so much more.
Check out Free Money for more tips and tricks on making money.