How can you prepare for financial uncertainty?
Worrying reports are emerging that Britain is likely to be hit by a deep recession this year. This is the result of high energy bills, soaring interest rates and businesses failing. This may be the biggest recession out of all of the largest economies in the world.
The UK economy is expected to shrink by 0.9% this year. In terms of business insolvencies, these are likely to rise by approximately 15%, with inflation remaining uncomfortably high. However, inflation is expected to dip slightly to 7.5% in 2023.
With this in mind, here are a few ways to prepare yourself and your money well in advance.
- Alter your spending habits
- Look at your debts
- Work on your emergency savings
- Check your credit score
Review your spending habits. Find the last three to six months of bank statements, print them out and analyse them. Use different coloured pens to highlight essential spending and discretionary spending, as well as your wants and your needs.
You needs include rent and mortgage payments, food and bills. Your wants, however, may be clothing, electronics or subscription services. Although some monthly or weekly spends may seem small, such as a morning coffee or a takeaway, the costs can quickly add up.
Prioritise your spending and work out what works best for your monthly budget. Creating a simple budget which highlights all incomes and outgoings can help you decide what you can afford and where you can cut back.
Reports show that over two-fifths (45%) of the British population currently consider themselves to be in debt. This is a staggering statistic, with debts not only extremely worrying but can impact everyday life. Debts may also impact your credit score negatively.
Try to prioritise paying off debts with high-interest rates first. This will get them out of the way so they don’t accumulate too much interest. Being in a debt-free position, or having as little debt as possible will be hugely beneficial during times of economic uncertainty.
If you have a personal loan, ensure you are paying it on time every single month. Late payments or missing a payment completely can have an impact on your credit score, which may mean you find it more difficult to secure financial products.
Having a backup fund is always usual, but it is particularly pertinent in times of financial crisis. Not only does it give you peace of mind, but allows you a small cushion in case of unexpected events such as redundancy or increased living costs.
It is imperative you check your credit score often and identify areas for improvement. This can help you secure affordable credit in the future and allow access to a wider range of financial products and services.
Paying debts on time, paying utility bills in your own name, registering to vote, avoiding payday loan companies and clearing any County Court Judgements (CCJs) in your name, can all aid in improving your credit score.