It’s an undeniable truth that we are living in a time of recession. The ongoing cost of living crisis is making life difficult and investment precarious. Higher rates are forcing many people to rethink their personal finances and make changes to their purchases. With politics so unstable, and costs of everyday items so high, it’s a challenging time when it comes to handling money. The property market is tumultuous, the stock market is unpredictable, and when looking to the future nothing is certain at all. Mortgage rates are on the up meaning buying a house is more difficult than ever, and rental opportunities are going down due to landlords abandoning the sinking market. The volatile nature of it all can make life feel stressful and managing money feel overwhelming. What can you do to manage your personal finances during this difficult time?
Fortunately, while the global situation is out of your control, there are things within your control that you can do to manage your money more efficiently. You might not be able to stop the recession in its tracks, but you can protect yourself from the damage it can do financially. We will consider a few simple tips that will help you to take control of your personal finances and cope with a recession.
How to Cope with a Recession
- Cut your coat according to your cloth. This is a well known saying in the UK, but what does it really allude to? Basically, endeavour to live within your means. Pay off any debt or credit as quickly as you can and avoid taking on new debt as much as possible. Don’t spend more than you can afford. This might take some sacrifices, but they will be worth it in the end.
- Work on reducing your bills. Take an honest look at your outgoings and see in which areas you could tighten your belt. Even small little spends add up, so think about the bigger picture and look for ways to reduce your outgoings as much as possible.
- Save up a fund for emergencies. As previously mentioned, the world in which we live is unstable and you could be left without a job or steady income at a moment’s notice. Endeavour to put aside 3 to 6 months of wages an emergency fund which will act as a financial cushion in a time of crisis.
- Earn extra income on the side. There are lots of ways to make a little extra money with a side hustle. Having multiple sources of earnings is a protection too, as if one fails you have others to fall back on. Don’t take your job for granted, but at the same time there are a lot of vacancies going at the moment so it could be a good opportunity to make a change if you are a looking to do so.
- Have a long range view. Invest for the long term – think about putting money into assets such as shares. Do thorough research before you part with your hard earned cash, and diversify which businesses and companies you invest in. Perhaps you can get into the property market and make some money there too. Look to experts (like Propp) for financial advice and support and you will be sure to get through the difficult times successfully.
- Plan for your retirement. When belts tighten, one of the first things to get cut is pension contributions and if your retirement seems like a long way off that option can be considerably tempting. However, even as small a cut back on your retirement will add up to a big loss over your lifetime. See if there’s other expenses you can cut first, before you skimp on your retirement fund for the future.
Hopefully just these few suggestions will help you to start thinking about ways you can look after your finances during a recession.