Recession-proof your finances
It’s been on the cards for some time – and now it’s official. In the second quarter of 2020, the UK economy shrunk by 20.4% – meaning we’re officially in recession. Over 730,000 workers are now unemployed, and 2.7 million people are currently claiming universal credit.
Covid-19 has left an indelible scar. Familiar shops have closed their doors for the last time. Unemployment and redundancy levels are at an all-time high – and opportunities are at an unusual low.
While the thriving economy of just a few months ago might seem unrecognisable now, there are plenty of ways you can take control of your own personal finances and feel more confident about the future.
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Know your payment priorities
If you were asked to put your household outgoings in order, what would come first – and what bill would you shuffle to the bottom of the pile? It’s important to understand where your financial priorities lie. Council tax and rent or mortgage payments should always come first – after all, they’re what keep a roof over your head and bailiffs from the door. Other priority payments will vary depending on your lifestyle and needs – but car insurance, for example, is always a non-negotiable – you must pay it to avoid hefty fines and serious repercussions for driving uninsured.
Find little ways to cut back
Small budget cuts will go a long way. Your first port of call? Check your bank statements to see if there are any outgoings that can be dropped. Cinema and gym subscriptions, app store purchases and streaming sites might not feel as essential as they once did while you’re watching every penny.
Save everything you can
Right now, saving for you and your family’s financial security comes first. If you find yourself with a sudden cost to source – for a domestic breakdown or repair, for example, having an emergency fund can safeguard you against financial disaster and debt. Any amount of emergency savings is better than nothing, but experts recommend having between three and six months’ wages put away for a rainy day – so if someone in your home loses their source of income, there’s more of a buffer between you and debt.
Deal with your debt
Having debt during a recession can be nerve-wracking, especially if you’re not sure where your next monthly paycheck is coming from. If you can, make it your urgent priority to pay off any high-cost debts. Knowing you don’t have to find room in your budget every month for costly credit card bills, catalogue debts or store cards can help you enjoy a little breathing space if your income drops – and save for any emergencies on the horizon.
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Audit your finances
If you’re furloughed, there’s no guarantee that you will go back to business as usual at the end of October. Chancellor Rishi Sunak has emphatically stated that this is the end of furlough scheme. One way to prepare. You should also aim to understand the redundancy pay you’re entitled to, and plan for your career if things do take a turn for the worst.
Reassess your mortgage
Borrowing rates have dropped to an all-time low – meaning it could be a good time to renegotiate your mortgage for a keener interest rate. This will be most beneficial if you’re coming to the end of your existing mortgage term. Aim for a fixed, rather than variable rate to take advantage of the low rates – and keep your outgoings low for a set period.
Make sure it’s covered by the FSCS
Is your bank covered by the Financial Services Compensation Scheme (FSCS)? Now might be the time to check. If your bank goes bust the scheme will protect up to £85,000 of your cash. It’ll also protect temporary balances, which you may have if you’re moving house, for example, up to £1 million. Regardless of the size of your savings pot, it’s important to look after what you have.
Search for better deals
It might seem like a hassle you don’t need right now but searching for better deals is a simple way to make your money work harder. According to comparison site Uswitch, fixed energy plans used by 1.5 million households are expected to end this summer – and those homeowners could save an average of £149 a year if they changed provider. It really does pay to check your tariff, don’t let your loyalty cost you.
Don’t be afraid to ask for help
If you’re worried about your finances, it’s important to seek help and advice. Managing money can be hard at the best of times, never mind during a health and financial crisis.
Make sure that you are aware of all of the benefits that you may be entitled to. From Universal Credit to child benefits and tax-free childcare, there’s no shame in asking for help.
If you’re worried about your finances and are looking for advice about dealing with your debts, talk to Creditfix. Our dedicated team is on hand to offer free advice tailored to your needs. Call us on 0808 253 2966.
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