The economies of the world have slowed down – whether it is a recession or not is something that will no doubt come up for discussion as each day goes by, but for now we are facing the need to learn how to start cutting back and ensure we come out of the slow down on top of our finances with minimal loss.
Economists are predicting it will be a turbulent year ahead and a steady learning curve for many people in how to manage finances into the future.
Let’s look at how to survive a recession by trimming the fat from our financial obligations so that together we can all come out on top at the end of the financial storm.
Pay off your high interest debts
If you have debts that are getting charged daily with high interest – prioritise them as your number one concern. High interest charges will take you a few steps backward each day until they are paid off, so try and tackle things like Store Cards, High interest credit cards, short term loans and other debts that utilise high interest charges before doing anything else.
If you were to not have employment, these debts would be crippling so the sooner you pay off your high interest liabilities the more secure you can feel for riding out the storm.
Mortgage Payments & Home Loans
Pay over the required amount towards your mortgage each month. You want to try and create a buffer for your largest asset that is most likely to be affected by the potential recession. Once again, imagine if you lost your job – you will need this buffer to drawn down on your mortgage should you need extra cash flow or you are unable to meet repayments for a few months while finding work.
Consolidate those credit cards
If you have a number of different credit cards, odds are they are all at different interest rates. As times get tougher, the credit card companies will increase their interest rates to handle the pressure they themselves are getting from the global credit issue.
Get all of your cards and consolidate them onto one easy to manage debt with a locked in interest rate.
Personally I took advantage of a Citibank credit card that offered 2.9% interest for 18months on balance transfer. Doing this allowed me to have a VERY low interest rate and 18months to really attack the debt and get rid of it. I am now making significant payments each fortnight that are far over the required minimum. Doing this I hope to have the debt reduce to a couple thousand or nothing come the end of 18months.
Fixed Rate VS Variable Interest Mortgages
Interest rates are continually dropping as a result of the Reserve Bank of Australia trying to lower the impact of the pending recession.
Stick with, or get yourself a variable rate mortgage to take advantage of lowering interest rates. Remember that they can potentially go back up again in the near future, so weight these odds up and like all advice given – consult with a financial planner.
Clear your house of unwanted items
That’s right, get rid of EVERYTHING in your house that you no longer need. Try and sell all items and get cash in exchange for them.
You can eBay things, hold a garage sale and sell things via the Trading Post. Make those useless items in your house into cash – remember that one persons junk is another persons treasure!
I did this recently and eBayed a whole bunch of stuff to make extra money for a car payment, within 2 weeks I had made $500 from selling old DVDs and Baby clothes.
Look for things to cut back on
Find the added extras in your life that you currently pay for. Find out what are important and what you can live without.
Here is a list of examples that you may want to look at:
- Lowering your mobile plan.
- Canceling your gym membership.
- Stop drinking bought coffee’s at work.
- Cancel your wireless internet plan.
- Lower your broadband plan.
- Eat out only once a month.
Re-think your savings plan
As much as we encourage and promote saving money for emergency funds and rainy day accounts – it is sometimes better to use that money to create the buffers required for potential looming recessions by paying extra on your mortgage or removing those high interest debts.
Slow down your spending
Economists for the Government would be upset to hear me say this as the looming recession is depenedent on consumer spending and slow down rates, but if a recession were to come about – try and buckle down and slow down your novelty spending so that you have more money for the core elements of your finances like home loans and debt reduction.
Employment during a recession
During a recession or pending financial meltdown, companies look at cutting back costs to help reduce the running costs of a business. This means that a lot of the time companies are quick to lay people off in an attempt to recover salaries as a way of paying off debt and reducing overheads.
Here are three important tips regarding employment in such a time:
Protect and own your job
This means that you should work hard, add value and show your employer that you are an asset to the company you work for. Put in the extra hours, the extra step and show that you are truly adding a monetary value to the business. Looking for a job when unemployment rates are at 5-10% can be very hard, so keeping your original job is even more important.
Be prepared for getting laid off
If the worst happens and you lose your job, be prepared. Have your CV updated and ready to go with a list of contacts you could potentially network with to try and get another job.
Earn money wherever possible
Try starting a side business, an internet business, an eBay business – any extra cash that comes in goes straight to your bottom line and create immediate help.
How do you plan to come out on top?
Share with us your strategy to come out on top of this financial slow down!