Now that we’re officially in a recession, it’s more important than ever to get your finances under control. From reining in debt to growing your savings, below are six ways to help recession-proof your money.
Boost your emergency fund
It’s recommended that you have between three to six months’ salary set aside for a rainy day. If you’re made redundant or lose your job, your bills will still need to be paid, even if your income stream has dried up.
Assess your spending and create a budget
Go through your transaction history and calculate how much you’ve spent on living expenses over the past three months. Divide your purchases into essentials and non-essentials.
Essential purchases should include things like bills, groceries, school fees and rent or mortgage payments. Non-essentials are luxuries like clothing or restaurants. Once you’ve worked out how much you’re spending across each category, it’s time to create a budget.
Set aside a portion of your pay each month for non-negotiables, then work out where you can lower your non-essential spending. This might mean limiting takeout to one night per week, cancelling an unused gym membership or refraining from online shopping.
Put your savings to work
Interest rates may be lower than past years, but a low rate is still better than nothing. Put your savings in either a high-interest savings account or term deposit to maximise the interest payable.
A high-interest savings account will pay a small amount of interest on your balance. You may also receive bonus interest if you can deposit a certain amount each month, but this will depend on the financial institution.
A term deposit acts like a locked savings account. Your funds are invested under a fixed rate for a set amount of time, and you won’t be able to access your money until this period has ended.
Focus on paying down debt
If you have a personal loan or credit card, it’s a good idea to prioritise these repayments first. These loans typically charge a higher rate of interest than other credit products, such as mortgages or a HECS debt, so focus on clearing these debts as your priority (but don’t neglect your other debts as your credit rating can be negatively affected by missed payments).
Hunt around for a better deal on your financial products
Are you getting the best deal on your credit card? Is there a better savings or home loan interest rate out there? The Finder app can help by analysing your savings potential across four common financial products – home loans, savings, health insurance and credit cards.
When signing up to the app, you have the option to connect your main accounts, including your superannuation. The app will analyse your financial products and spending, and notify you of your spending trends and potential savings to be had with another provider. Whether you decide to switch is entirely up to you.
Increase your income where possible
Try and find ways to bring in more cash if you can – every bit helps during a recession. There are a few different ways you can do this:
Content written by Bessie Hassan – a money expert at Finder.