Disclaimer: This article intends to offer guidance around how to prepare your finances for a recession, but may not apply to all readers.
How comfortable are you with your finances?
Whether you’ve been actively saving your whole life or you’ve only just started putting away some of your hard-earned pay, we all want to be in a position where we don’t have to worry about money.
But, like it or not, there are some economic realities that are just unavoidable. The recent cost of living crisis and the looming recession has left more and more people in an uncertain financial position, with many having to make sacrifices to keep their savings stable.
So, with that in mind, the team at Zuto want to give you some financial tips that you can use to make saving during the recession that much easier.
How prepared are UK citizens for a recession?
Before we get started, let’s take a look at just how prepared UK citizens are for a potential recession. We surveyed 1,000 people across the country to see how financially stable they feel.
With over half of Brits not confident in their own financial stability, what have been the main impacts of the cost of living crisis so far?
Which regions in the UK are the most prepared for a recession?
So, while our survey shows that roughly half of Brits are not prepared for a recession, some UK regions do appear to be more prepared for the financial impact on the horizon than others.
In Northern Ireland, 61.9% of those we spoke to say that they’re financially stable enough to be comfortable in a recession, compared to just 42.4% of those we surveyed in the North of England. Other areas of the UK like Scotland (57.7%) and South West England (50.1%) sit closer to the middle.
On a city level, however, people in Liverpool seem to be the least financially ready for a recession, with just 34% here saying they feel prepared. And alarmingly, 11% of people in Belfast don’t know what a recession is, a higher percentage than any other region!
Further north, 70% of people in Edinburgh say they’re using their savings to get through the recession, with 65% turning their heating off to ensure they make ends meet. Alongside this, 46% of people in Glasgow say they’re cutting back on Christmas presents this year to save money.
And as for the South, 21% of people in Bristol have taken up a second job to get through the recession, though problems appear worse in London where 9% of people are struggling just to find a new job.
Which professions have been hardest hit by the cost of living crisis?
Although the cost of living crisis is affecting us all in our own unique ways, our survey indicates that some professions are more at risk of financial instability than others.
For instance, a full 67% of people who work in recruitment and HR say they’re having to rely on their savings to get them through the current crisis, while 16% of those working in the financial market say they’ve actually lost their jobs.
Combine this with 15% of those who used to work in tourism, sport, and leisure saying that they can’t find a new job, and it’s clear that good planning is essential to ease the financial stress of the coming months.
How can you prepare for a recession?
While a recession might be a financially trying time, there are plenty of ways you can save money to help you get by. The following are our top tips for recession-proofing your finances.
1. Start boosting your credit score
Applying for credit in financially trying times isn’t necessarily recommended, but if you find yourself with no other choice, then a good credit score will at least give you lower interest rates. But where do Brits stand with regard to their score?
If you unsure what your credit score is or think you have bad credit, it’s best to reach out to one of the main credit reference agencies and ask for your credit report as soon as possible.
As an added bonus, here are 15 tips on how you can improve your credit score today.
2. Try to live within you means
One of the key ways people are already preparing for a recession is by living within their means. Once rent, bills, food, and other vital necessities have been accounted for, your remaining finances should be turned towards saving. That way, you’ll have more financial flexibility to meet any unforeseen problems.
3. Minimise your outgoings
Minimising your outgoings is all about cutting out what you don’t need. This means ending unnecessary subscriptions, eliminating that daily cup of coffee on the way to work, and cutting back on holidays.
One of the best way to minimise your outgoings is to create a budget that you strictly follow. Look at your current finances, see what you can cut out, and then focus on saving the rest where you can.
4. Continue paying back your loans
Although paying back loans and credit will prevent you from saving as much money as you might like, the quicker you can get these loans paid off, the more money you’ll be able to save in the future. Start by paying off your high-interest loans first, as these cost you the most in the long-term, and pay off your credit cards so they can be used in an emergency.
5. Get smarter with your shopping
Everything we’ve mentioned can be used to help ease the burden on your overall budget, but you also need to look at ways to reduce the costs of essential outgoings.
Changing your shopping habits is a great first step. By switching to a cheaper supermarket and planning your meals ahead, you’ll spend less money on foods you don’t need.
You might also want to consider using price comparison sites as well. Apps like Trolley can show you the cheapest place to buy a food shop, and Switcheroo shows different energy price rates.
6. Switch to a cheaper utility provider
While the cost of living crisis is making this tricky to do, it never hurts to keep looking for cheaper utility deals on the off chance the opportunity to switch providers appears.
Whether for electricity, gas, water, or the internet, do your research so you can find the best deal for your needs and make the switch as soon as possible. Best of all, you may even get free money from certain companies as a reward for switching.
7. Use budgeting apps
Another nifty saving tip to consider is using budget apps to monitor and track your spending. Apps like Emma help with avoiding dipping into overdrafts, whilst also recognising any opportunities to pay off debt.
Alternatively, Money Dashboard is a financial management service that categorises transactions so you can clearly see which areas of your lifestyle you’re overspending in. You could even switch to a bank such as Monzo to setup spending budgets, letting you put any excess cash into a saving pot.
8. Turn your hobby into a side hustle
Most of us have probably heard the phrase ‘do what you love, and you’ll never work a day in your life’, and the current cost of living crisis is no reason to drop your hobbies. The only difference is that you should think about turning these hobbies into a way to make money on the side.
There are plenty of websites online, such as Etsy, which let creators share and sell their content with the world. All you have to do is set up an account and get started. The money brought in by this can then go towards your savings or act as spare cash for social events.
9. Save sensibly
No matter your financial situation, everyone gets hit in a recession. But regularly putting away a small percentage of your pay each money will go a long way towards creating a financial safety net.
Sites like Money Saving Expert or Money Supermarket can compare the best interest rates on savings accounts, and you even open a locked account with a time limit to ensure you aren’t dipping into the savings for unnecessary purchases.
10. Talk about your finances
Above all, if you are struggling with your finances, it best to talk to someone about it. There are many support lines out there for people in financial difficulties, plus debt and credit charities that offer advice and step-by-step solutions.
UK Debt Support line, Debt Careline, and Money Advisor are all services that can advise you how to balance the books and get back on track with your finances.
There are, of course, numerous other ways both big and small that can save you money and recession-proof your finances. Sometimes, however, we need to spend money on things vital to our work, such as owning and fuelling a car. But thanks to our above tips, you should be able to maintain a good credit rating for outgoings such as car finance.
Here at Zuto, we’re experts in providing bad credit car finance and working with those who have tight budgets to secure a financing deal that works for them. Get in touch with our team today to see how we can help or visit the Zuto blog for more helpful insights like this article.