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Now that the recession has arrived, it’s probably going to be with us for the next 12-18 months. Since the 1900’s, the average recession has lasted around a year and half.
The key to navigating your way through it is to prepare, so you’re in the best possible position. Although it will be a challenging time for many of us, I urge everyone to meet any financial challenge head on
In my view it’s much easier to adapt and make plans when you have all the required data and all your ducks are in a row.
Although an economic recession can be difficult, it can also be the catalyst for positive change. It often forces us to review our finances and, in some cases, tweak our daily lives for the better.
Here are our top 10 recession money rules to improve your prospects of surviving an economic decline.
1. Try Not To Panic – Recessions Don’t Last Forever
If your job or your income changes, you may have to cut costs and live more frugally. You may even have to dip into your emergency fund, you can always top up your fund once it’s all over.
If you don’t have an emergency fund (if possible) it would be beneficial to get to building one ASAP.
2. Emergency Funds
If you don’t already have one, try to save as big an emergency fund as you’re able to. In a stable economy, the recommendations are saving for three to six months’ worth of living expenses, so anywhere upward of that is ideal.
Having an emergency fund is good practice whether there’s an economic downturn or not, money can be a real source of anxiety and an emergency fund can offer real peace of mind.
Having no emergency fund or being unable to build one is a clear sign that you may need to look at your budget or even start budgeting.
A budget is such an amazing tool to promote positive habits when it comes to your money management and it will really help you through a recession.
3. Minimise Debts
If you have debt, minimise it if you can – especially debt with rates of high interest. Try to negotiate your credit card interest rates by calling your card issuer. If a rate reduction isn’t an option, consider transferring your debt to a lower or better still zero interest rate card.
Consolidating your debts to one card with a lower monthly payment can also free up capital in the event of an emergency. However, if you transfer any balances, keep your original credit cards open. The age of your accounts is a huge factor in maintaining your credit score.
This will be essential if your finances are squeezed too tight and you need to borrow. When interest rates are high, lenders will take a hard look at your credit status.
4. Check Your Mortgage
If you have low-interest mortgage debt, stay put. If you have a variable rate mortgage or your fixed period is coming to an end, then time is of the essence. It’s advisable to get in ASAP look for the best deal you can find. Given the current rate of inflation, interest rates are likely to continue to rise.
Many people believe that paying off debt during a recession is a good idea. I believe it depends on your situation. If you have plenty of spare cash on top of your emergency fund and you don’t like the idea of investing, then it could be right for you.
However, if cash flow’s not that great or you’re trying to build an emergency fund it may be better to make as big a repayment as possible whilst keeping some cash accessible. Just in case the worst does happen and you lose a source of income, the money you’ve saved can help recover expenses until you regain financial stability.
If you pay rent and you’re struggling to make payments, approach your landlord in advance and negotiate a payment plan moving forward or better still try negotiating a small reduction in rent. If you’re respectful and you’ve been a long-term reliable tenant, they may be happy to work with you if they’re able to.
Approach your local council and Department for Work and Pensions and make sure you are obtaining all the assistance available to you. Reductions in council tax and benefits payments are available and can be invaluable in times of financial instability.
5. Household Energy Bills
Review all of your household energy bills – we know energy prices are at an all-time high and unfortunately there are no cheap deals to be found. So how do you approach the future, what can we do to actively improve our energy bills and manage their payment?
First, with the price cap predicted to rise again by well over 50% in October it’s worth checking you’re on the best possible deal. Some firms are offering short-lived fixed deals to their existing customers that may be worth considering. It could work out cheaper than the price cap rates over the next year.
It’s also important you make sure you’re up to date with all government and local council initiatives and grants, these are put in place to support our communities in times of need. Make sure you’re receiving all the help you’re entitled to.
If you’re struggling to pay your energy bill and it’s becoming the cause of anxiety, it’s always best to talk to your provider – the sooner they know, the better. They are obligated and often happy help. A payment plan in most cases can be negotiated. This option is a far better than taking out unnecessary loans or credit to cover such costs.
6. Be Energy Efficient
To reduce your energy bills and make your home energy efficient, is it time to invest in some upgrades? If you’re thinking along these lines, again It’s a good idea to look into local authority or government grants to assist you with these costs.
While some energy efficiency upgrades are costly and need professional installation, there are other quick and cost-effective DIY ways to insulate your home. These include draught proofing doors, there are many different draught proof self-adhesive brushes and tape strips available at relatively low cost.
Insulating your loft doesn’t have to cost the earth and draughty windows can be improved with draught insulating kits, insulating film or acrylic sheets. These can be purchased for pounds and pence. Soft furnishings, such as curtains, cushions, and throws not only look great but can be effective draught excluders.
Make sure all your appliances are running efficiently. A yearly boiler check can avoid costly breakdowns. Simply bleeding radiators can make them work more efficiently. From time-to-time air can get trapped inside creating cold spots due to the hot water not circulating properly. Bleeding your radiators will rectify this problem and get them back to their best in no time. If you’re not sure how to do this, YouTube to the rescue. I promise if I can do it anyone can.
7. Other Small Changes to Reduce Energy Costs
There are so many small changes we can make throughout the day. These take a little forethought but hardly alter our lives and in return, over time can save substantial amount of our hard-earned cash.
- Turn down the thermostat down as low as is comfortable and wrap up, using throws and cover-ups can make a TV night feel cosy. Reducing the temperature by even 1-2 degrees over time can cut a real chunk off your bill.
- Smart thermostats provide great energy saving capabilities. The Google Nest for example learns the temperatures you like, can turn the heating down automatically when you’re away and can be controlled easily from your phone.
- Try to remember to turn off lights when you can and use energy saving LEDs as soon as you’re able to. Don’t leave electrical items on standby, anything you can turn off, do so. Invest in a smart plug which can be controlled via an app on your phone to turn off those hard to reach sockets behind the TV.
- Get used to only filling the kettle with the amount of water you need you’d be surprised how much energy a kettle requires to boil.
- When it’s time to replace white goods buy the most energy efficient you can afford, it will pay for itself in no time.
- Cook smart. It can be a challenge at times with the kids but get the family eating together so the oven / hob is not constantly in use. Try one pot recipes as often as possible, they’re often family favourites and leftovers can usually be frozen and make an excellent option for a packed lunch.
- Using dry fryers and slow cookers can be a cost-effective option and defrost your food the old-fashioned way (take it out of the freezer the night before you want to use it) it’s free.
- Launder smart, wash at the lowest temperature possible and try to reduce the time of the wash. Pre-soaking extremely dirty clothes in salt water, like mum or grandma used to do, can really help with this. Look at each item of clothing before you stick it in the machine, realistically some items don’t always need a machine wash. A spot clean or freshen up with a spray like Febreze, Astonish or a rub with baking-soda may be all that’s required.
- Dry your clothes naturally as often as you can, it’s always been the best way.
8. Small Tweaks for Big Savings
Review all your subscriptions, some are surprisingly expensive over a 12-month period. Do you still use them all, can you do without any of them? The ones you don’t use – cancel, the ones you use the least – try life without them for a while (you can always re-subscribe).
The essential ones like your broadband, phone, or the ones you use regularly – contact your supplier and try to negotiate a better deal. In the current climate your custom is a valuable commodity and your provider may be happy to help. If they’re not helpful – switch, you could probably find another more cost-effective option.
Although our health and level of fitness is extremely important to most of us, in obtaining or maintaining good health many of us are spending money we can ill afford when it doesn’t have to cost us a penny or at the very least could cost us less.
If you’ve got a gym membership and don’t really use it then cancel it. Not only is it draining your resource but it’s also not motivating you to get fit either. You probably need to seek out alternative activity.
If you do use the gym but money is tight, shop around as there will be other, more cost-effective alternative. There is always the DIY approach. Along with the obvious running and walking there is so much free advice and content out there to aid you in your quest to get or stay fit and healthy. With a little research you can try any type of exercise such as calisthenics or yoga wherever and whenever you like.
Then there’s transportation which can cost a fortune. With a little creative thinking you could save yourself a packet. It won’t be appropriate for everyone, but walking or cycling could eliminate the cost of running your own vehicle or public transport altogether. It’s also the healthier option for both you and the planet.
If you run your own vehicle, consider the way you use it and the cost of fuel and join a car sharing scheme. If you’re shopping or running errands, calculate how you can take on multiple tasks in one outing instead of multiple trips. If there is no-cost delivery on a product you’re buying, opt to order it instead of driving to pick it up.
There are many ways to save on public transport. With a little homework you could take advantage of split ticketing which is when you split a longer journey and buy multiple tickets to cover the component parts of the journey instead of buying one through ticket.
There are also many money saving travel cards, pre- booking tickets discounts and of course local authority discounts out there to help with these costs. If you’re on universal credit you can apply for bus and tram discounts.
9. Get Creative & Shop Smart
When it comes to shopping strategies, if you’re happy to be flexible and you’re able to think on your feet, there are many ways you can cut costs.
- If you can afford to bulk buy non-perishables, it can be a great way to save. When you buy items in bulk the unit price is usually much less offering you a cost saving on the day and any items used later may save you even more should inflation continue to rise.
- Choose your market place wisely, shopping at local markets, farm shops and economy supermarkets can seriously reduce your shopping bill.
- Buy from generic brands. Items such as garbage bags, lightbulbs, laundry products, toiletries, pet food, canned goods, the list is endless. In most cases alternative brands are not just cost effect but they also taste as good or perform just as well.
- Always shop around and take advantage of any special offers and sale prices. You can build a meal around ingredients you’ve bought at a reduced price just as well as one you’ve paid full price for.
- Stop buying expensive coffees to go and bottled water. Invest in a reusable water bottle and coffee cup, its eco-friendly and if you choose your vessel carefully, they’ll keep your drink at the optimal temperature for longer…bonus! There really is no shame in supplying your own.
- Try to work with what you already have. Upcycle where you can and always consider the pre-loved market. Its often a sound choice, you’d be amazed at the fun you can have and the bargains that can be found and again it’s good for the planet.
- Re-sell your stuff. Second-hand sellers can thrive during recession. Sell items you no longer use to second-hand stores, car boot sales and flea markets. There are also numerous online marketplaces such as Vinted, eBay, Gumtree, Depop and Amazon Marketplace.
- Try not to succumb to emotion when shopping, I realise it can be a challenge especially when shopping with the kids. Try to follow the “not today” rule. It’s a fabulous technique which acts like a cooling off period. It gives you time to think about the purchase and if you change your mind, you can always go back.
- More importantly, only buy what you need or alternatively spend your money on experiences that bring you real joy.
10. Increasing Your Income
Improving your income is often essential in a recession. I believe working smarter rather than working harder is the better choice. If you have the option to enhance your market value, it can be better for you in the long term. Simply working overtime soon burns you out and time is also a precious commodity.
Improving your skills or enhancing your education will make you more marketable during a tight job market. Sign up for classes, take workshops, and volunteer. The soft and hard skills you pick up will add plenty of shine to your job prospects it may increase monthly pay packet quicker than you think.
Create additional sources of income. One of the biggest risks consumers face during a recession is loss of income. Mitigate that risk and start a side hustle, there are so many options out there.
If you find yourself in a position where you’re having to considering a career change, look for recession-proof positions. Although no job is completely safe during a recession, certain jobs like those in essential services offer more security; think nursing, teaching, law, accounting, public safety, utilities, waste management and other jobs that keep society running.
Good luck and thanks for reading.
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