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The UK is not officially in recession, which is defined as two consecutive quarters of negative growth.
However, the country remains within touching distance of this definition. And millions of householders are facing rocketing bills and steadily rising interest rates are struggling regardless.
But there may be some simple ways of shoring up your finances to weather the dark clouds looming over the economy. Here are some money saving suggestions for when times are tough.
Managing your money
Getting your household finances into the best possible shape is a good starting point to dealing with increased costs, emergency bills, or any unforeseen changes to your income.
1. Draw up a budget – and stick to it
When money is tight – and potentially getting tighter – a workable budget becomes more important than ever.
Start by noting down all your essential outgoings. This includes mortgage or rent, energy costs and other utilities, food shopping, insurance policies and childcare costs. Don’t forget fuel, holidays, and any debt repayments – leave no stone unturned.
Next, deduct this total from your net household income to see what’s left for the month. This is your ‘disposable income’. From this you’ll have an idea of what, if any, flexibility you have in your budget.
Sticking to a budget will keep costs under control and avoid build-up of debt. And remember that household budgeting shouldn’t be seen as a one-off exercise. It is important to revisit any budget regularly.
2. Squash debt
Use as much of your disposable income as you can to pay down debt – especially expensive debt such as credit cards. As interest rates are rising, so are credit card APRs (annual percentage rates) so always pay more than the minimum if you can.
Laura Suter, head of personal finance at investment platform AJ Bell, says: “Start with the highest interest rate and tackle that debt first, before moving to the next highest rate. Moving this burden off your finances could really help if times get even tougher.”
Look for cheaper borrowing options, such as a zero interest balance transfer credit card, or consolidate expensive debts into one low-rate personal loan. This will offer valuable breathing space during which to get it repaid – or reduced.
3. Spring clean
There may be ways you can reduce costs without impacting your lifestyle – for example, by changing where you buy the weekly groceries or cancelling any unwanted subscriptions or memberships.
And, with a possible recession looming, think twice before making a large purchase, such as upgrading the car or taking a major holiday. This is especially the case if you’re going to have to take out credit to fund it.
4. Shop around
There may be ways to reduce monthly ‘fixed’ costs too. Shop around for cheaper car insurance at renewal and seek out a better broadband and mobile phone package.
So long as you’re not within contract you should be able to find a cheaper, and even better, deal. Or you may be able to haggle with your existing provider to lower your monthly costs without switching.
Before your mortgage deal comes to an end, contact a fee-free broker to compare the best remortgage deals for your circumstances. You can usually lock in a new mortgage rate up to six months in advance – and in some cases, a year.
Interest rates – and therefore mortgage costs – have risen sharply over the past 12 months and the best fixed rates could be much higher than your current rate. But by getting prepared you can reduce the impact on your monthly mortgage payment.
Saving for the future
It’s also a good idea to plan further ahead where possible. Bear in mind recessions are often marked by job losses, so now is the time to shore up your cash reserves. Here are some ideas of how to do it.
5. Amass an ‘emergency fund’
Financial experts often recommend having three months’ salary in an easy access savings account in case of emergencies. Even if this target is overly optimistic, get started anyway by opening a savings account and stashing away whatever you can afford each month – even if it’s just £10.
Set up a direct debit for the chosen amount on the day you get paid so you’ll be less likely to miss it. Ms Suter at AJ Bell says: “Make sure you’re getting the highest interest rate you can from a reputable provider, so your money grows until you need it.”
6. Squeeze the maximum from savings
Interest rate rises have been good news for savers. Some of the best easy access accounts are now paying 3% on deposits, while fixed rate accounts are paying more than 4%.
If you’ve held your savings account for a number of years, chances are the returns are no longer competitive. Compare rates and be ready to move your cash savings to take advantage of better deals.
Alternatively, with an online savings platform such as Raisin, you can manage multiple savings accounts from one place and receive automatic alerts when better rates become available.
Tips for workers
When the economy shrinks, there’s always the risk that employers will shed jobs. Here are some tips for those who are in the workforce and those who are getting ready to leave it.
7. Make yourself indispensable
Become the type of employee who is a team player and always ready to do their part. This shouldn’t be about working longer hours or taking on more, but a positive attitude in the workplace is always helpful.
If you are made redundant don’t leave without asking your employer key questions about the benefits and payments you’re entitled to. Contact a fee-free charity such as Citizens Advice if you are unsure of your rights.
8. Delay retirement
There’s no longer a compulsory retirement age in the UK so – especially if you like working – you might consider postponing the day. If you are nearing retirement age, staying put a little longer will not only mean continued earnings but could also boost your pension fund.
Once you’ve left the workplace it might be difficult to replace lost earnings – living off a pension usually represents a big drop in income. This could put a strain on your finances at a time when household bills are particularly expensive.
Boost your income
Recession or no recession, rising costs are putting a big strain on the household finances. It’s worth investigating if there are ways you could boost what money you have coming in, which would take pressure off your household budget.
9. Set up a side hustle
Do you have a hobby or passion you could turn into a money spinner? Some of the best side hustles involve selling online – such as clothes and toys you no longer need. If you keep local, you can specify ‘collection only’ and get cash in hand.
You may also be in the position to look into other part-time work that could boost the household coffers, such as making deliveries or jobs you can do from home. We’ve pulled together 15 small business ideas for inspiration.
Other ways to make money might include letting a spare room in your home (the first £7,500 of this income is tax-free through the government’s Rent a Room scheme) and renting out your driveway.
10. Look after yourself and your health
While you may be time-poor, taking steps to look after your health should be a priority. Without it, you may find it hard to generate any income at all.
From healthy eating and regular exercise to yoga and meditation, there are a wealth of self-care ideas out there designed to boost your mood and wellbeing.
Even small changes, such as a daily walk or coffee with a friend, are easy ways to stay grounded in uncertain times.
