The Bank of England warned us in early November that the UK is heading for its longest recession since records began. With the economic downturn expected to last until at least 2024, it’s understandable to be concerned about your personal finances.
As prices continue to rise but wage growth lags behind, many of us are feeling the squeeze. But while some factors are undeniably out of our control, there are steps you can take today to bolster your financial security.
In this post, we lay out some key planning and budgeting tips you can use to prepare for the tricky months ahead.
3 Ways to Stay On Top of Your Finances During a Recession
Make Sure You Know Where You Currently Stand Financially
Before you can think about how to save money during a recession, first you need to take an honest look at your current financial situation. With 39% of UK adults admitting they don’t feel confident managing their money, you’re not alone if you don’t know the amount of debt or savings you have currently.
Below is a breakdown of how you can begin managing your money more effectively:
1. Gather Your Current Statements:
Start by gathering together your statements from any current accounts, electronic wallets, savings accounts, or credit cards. You don’t need to do anything too complicated with the information – a simple spreadsheet will do. Add up the total value of what you have and what you owe.
If you have a lot of debt outstanding on credit cards, you may want to consider focusing on reducing that amount as a priority. With interest rates rising, credit card debt will become more expensive.
2. Put Together a Personal Cash Flow Statement
Next, draw up a simple personal cash flow statement and review the last calendar month. What were your incomes (e.g. salary, interest on savings, dividends from investments) compared to your outgoings (e.g. food, rent, bills, subscriptions)? If your outgoings were greater than what you brought in, consider where you could cut your expenditure this month. Doing this simple personal finance audit will help you see how much protection you have in the event your circumstances change unexpectedly.
Martin Lewis (founder of the UK’s MoneySavingExpert site) recommends building up an ‘emergency fund’ of enough money to cover three to six months of expenses. If you’re unsure whether to focus on paying off your debt or saving for your emergency fund, MoneySavingExpert provides simple guidance on what to prioritise depending on your situation.
3. Use a Regulated Provider
Finally, make sure that any money you have is held with a regulated provider (in the UK, this means they’re regulated by the Financial Conduct Authority). This regulation makes sure the financial service providers you use comply with all relevant legislation regarding handling and managing your money.
At DT&T, we take our responsibilities to our customers extremely seriously, and go above and beyond to ensure the safety of our FCA-regulated funds. You can find out more about the steps we take to protect your money here.
Recession-Proof Your Spending
In an economy heading for recession, it’s normal to feel guilty for spending money on anything but the bare essentials. But things are arguably bleak enough without depriving yourself of the things that bring you joy.
Tracking your income and expenses can help to highlight where your spending could be more efficient. And drawing up a straightforward financial plan for yourself will help you to make decisions between spending and saving.
It’s also worth taking the time to get savvy with your shopping. Subscribe to a reputable source that rounds up money-saving deals from around the web, so if there’s something you really want, you can check if it’s available at a discount. Money Saving Expert and Be Clever With Your Cash both offer a weekly roundup of deals and money-saving tips. If you’re in the UK, you can also check out the shops and services taking part in the Help for Households scheme. These businesses have introduced schemes such as discounted groceries and frozen prices on school uniforms.
As well as being mindful about what you spend your money on, make sure you’re also careful with how you spend it. For instance, if you’re transferring money overseas, make sure you’re not caught out by expensive fees. DT&T enables global money transfers at a low cost and with great exchange rates, which means you can transfer money without worrying about hidden costs.
If you do have a credit card (and the means to pay it off each month), make sure you use it for purchases over £100. Credit card transactions between £100 and £30,000 qualify for Section 75 protection, which means your card company is legally obliged to help recover your money if something goes wrong. This could be the retailer going out of business, or something wrong with the item.
Carefully Consider Your Investments
In a recession, share prices tend to decline as people are less willing to invest speculatively. This can seem like a negative if you already have an investment portfolio and you see its value go down. But if you take a long-term outlook, a recession presents an opportunity to buy stock at relatively low prices, which will then hopefully pay off in the long run. The Harvard Business Review recommends taking a 10-year outlook when investing during a recession – so don’t expect to see a return on your money any time soon.
In general, it’s probably a good idea to focus on clearing your debts and boosting your ‘emergency fund’ before trying to strike it rich on the stock market. But if you’re determined to invest during a recession, focus on well-diversified funds and ensure you’re able to wait a significant amount of time for a return.
How Can You Save On Your Global Money Transfer During a Recession?
At DT&T, we can help you manage your finances during a recession by offering you low fees and great exchange rates on your international money transfers. With our trusted app, you can access:
- Instant transfers to 180+ countries
- Fast and friendly customer service
- Multiple wallets in up to 35 currencies
- Transparency over your fees and charges
Sign up or get in touch with us today!
