How to prepare financially for a recession
It’s time to cut back on unnecessary spending and make sure you are as recession proof as you can possibly be.
This may be a difficult task, but having a number of reference points to keep you on track is imperative as Australia heads into its first recession for a number of decades – a period of time long enough for some generation to have never experienced such an event.
Following are five suggestions you can refer back to, that could be of great benefit to help you survive this and any future recession.
The five point recession survival plan
1. Start an emergency fund
The past few months have shown us what can happen when our income is put in jeopardy and how quickly we can be affected. For this reason alone it is critical to open an emergency savings fund. This should be money put aside for the sole purpose of getting you through tougher times than normal, should you ever be put in that position. An emergency fund could cover such things as utilities payments and the basic ability to put food on the table during those uncertain months.
2. Cut back on spending
Establishing what are necessities in your life and learning to live with what you need as opposed to what you want could be a very helpful step in helping you save. This isn’t to say you should deprive yourself of all the things that you love, but it is about to make a conscious effort to reduce your expenditure whilst causing minimal impact to your lifestyle. It could be as simple as changing mobile phone providers, or spending less at the supermarket, or having one or two less takeaway coffees during the week.
3. Create a budget and eliminate credit card debt
Establishing a budget is the first and most important step to successfully reducing your debts. Your budget should be an accurate and detailed list of all household income and where it needs to be spent. It should help you identify areas you need to put more money into, but also the areas where you can cut back. Use the InfoChoice Budget Planner to assist you to work out your incomings and outgoings and then budget appropriately. A properly created budget could also assist you to stop creating more debt.
Paying off an existing credit card debt may be one of the struggles you are dealing with. Look at transferring that debt into a balance transfer credit card. These cards usually offer a 0% interest rate on balance transfers for a specified amount of time. Just make sure to pay off the full balance before the 0% balance transfer offer ends.
4. Save on your insurances and utilities
Where would we be without insurance? Whether it's car insurance, home insurance, gas bill or phone bill, there are ways to keep a little more of your cash in your own pocket. As such, it’s time to do some research. You could be saving quite a few dollars by analysing your current insurance policies. Check for extras that you don’t currently need. See where you can cut back. And once you have established that, ring around and find the best deal. The same rule applies to your utility bills including gas, electricity, internet and even mobile phones. You will be surprised by how much you could save per month just by looking into a few of these bills.
5. Learn new skills and keep your resume up to date
In the event you become unemployed, learning a new skill may help in your search for a new job. Educate yourself with transferable skills. These are skills that can be easily transferred from one job to another and are useful to employers across various jobs and industries. And don’t forget to update your resume as soon as you have gained any new skills. Universities and TAFEs are currently offering free courses and the government has also chimed in its bid to reform Australia’s education sector. Have a look out for courses that may interest you to not only upskill, but potentially lead you into a lucrative career change.
This update is not financial advice. This article is general news and information.
Home Loans: The comparison rates are based on a secured loan amount of $150,000 and a term of 25 years.
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WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Comparison rates are not calculated for revolving credit products.
The products compared in this article are chosen from a range of offers available to us and are not representative of all the products available in the market and influenced by a range of factors including interest rates, product costs and commercial and sponsorship arrangements
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