Ann-Marie Atkins, Head of Financial Planning at Tilney commented: “Now that the UK is officially in a recession, the first time in 11 years; it’s high time people take stock of where they are professionally and financially. With over 700,000 people losing their jobs during the lockdown*, addressing the security of your current employment is vital. While this might be a tough question to ask yourself, assessing how vulnerable you are to a possible redundancy and whether you’re financially set up should the unfortunate situation occur will help you prepare and ease your mind.
“Taking some time to have a financial check for the short-term, look at your cash flow and review your overall cost of living and putting a comprehensive financial plan in place now will reduce any money stress you may be feeling.”
To help recession-proof your finances, here are 5 steps from Tilney to consider:
Get a true picture of your outgoings
The first thing to do is to work out what your current financial situation is and whether it might be changing. By understanding the impact of the pandemic on both your income and outgoings, you will be in a much better position to draw up a household budget to get through the current period and beyond.
Identify cost savings and scrap unused subscriptions
You’d be surprised just how many people continue to pay subscriptions, standing orders and direct debits without even realising. Thoroughly reviewing your actual outgoings is an opportunity to identify any further savings. Consider where you can make cutbacks to regular costs; so, scrapping any unused subscriptions, finding a cheaper deal on recurring costs like your mobile phone, energy bills or car insurance. All of this will accumulate extra money at the end of the month which can go into savings, or be invested, in order to give you greater financial stability during these uncertain times.
Check your bank balances
Everyone should endeavour to have some ‘rainy day’ cash savings put away to provide a financial buffer for emergencies and tough times like these. As a first step, pay off any loans or credit card debts, if you are able to do so without incurring any prohibitive early repayment penalties. Take a long hard look at how much cash you need to keep readily available and look at ways any excess can be put to use day-to-day.
Review existing investments and think about others
Despite what you may think, investing while markets are more volatile and share prices have weakened can actually present really strong opportunities for long-term investors. By feeding cash into investments in stages over the coming weeks and months, you should reduce market timing risk, as you’ll end up with ‘pound cost averaging,’ an average entry price that reflects some days when the market is up and others when it is down.
Protect yourself for the future
The economy will eventually bounce back but managing our money effectively will remain a challenge, so it’s important to think about how we can protect ourselves and our loved ones from future uncertainty. Consider insurance arrangements, like life cover, critical illness cover or income protection, that will protect your finances should anything unexpected happen and give you greater peace of mind.