Economies around the world are struggling, and Australia is now in recession. There are a few ways to focus on your finances and become more financially secure during a recession.
Build an emergency fund
A recession and potential job losses or work hour cuts can make it difficult to pay your day-to-day expenses. If you can, now is a great time to start building your emergency fund to help you navigate a recession and gain some financial security.
The amount you have in your emergency fund will differ between person to person. Generally, you should have enough money to cover three to six months of your expenses.
Revise your budget and cut back
Look at your budget to decide what is essential and anything you can cut back on. Essentials will include your mortgage, rent, utilities and insurance.
It is important also to remember that while it might be an essential expense, you might still be able to save money. Shop around and look at comparison websites to get the best rates and offers on everything from your insurance to food shopping.
Live within your means
It is nice to splash out and treat yourself now and then on discretionary items. But a recession is the time to really consider what matters most to you and only spend what you can afford. Think about your lifestyle and the luxuries that are important to you – dining out, subscription services, or the latest technology. You might be able to cut back, for example, if dining out is important to your lifestyle, you might choose to go out once a fortnight instead of weekly.
Consolidate your debts
Consolidating your debts can help you get a better handle on your expenses. It makes it easier to manage your repayments in one payment, ideally at a lower overall interest rate. This will help you to manage your expenses and hopefully pay off your debt sooner.
Build your skills
A recession can be a great time to build your skills and pursue further education. New skills and training can make you more employable and help you find work or keep your current position.
Think long term
It is important to remember with investment strategies and superannuation that you will see results in the long term. Don’t make changes based on short-term economic events, as you might miss out on potential growth in the future.
It is hard to predict the future, so it is essential to boost your financial security when possible, especially during times of uncertainty like recessions. Our team are here to help.