AD| Financial experts define a recession as a sustained drop in economic activity that lasts more than a few months. If the economy shrinks again in the following three-month period to December, then the UK will officially be in recession. It usually comes with higher unemployment and lower house prices. While a recession is brutal for everyone concerned, there are steps you can do to help your finances weather the storm.
Try these strategies:
Invest in an emergency fund.
A solid rule of thumb is to have six months’ worth of living expenditures in your savings account. If you lose your work or your income drops, it will provide you with a financial cushion to prevent a crisis.
How to build an emergency fund: Start by setting up a separate savings account and contributing to it regularly. Have your employer automatically deposit a portion of your paycheck into this account if you can. Monzo bank works great for having separate money pots!
Once you have built up a sufficient balance, you can use the money to cover unexpected expenses or as a cushion if you lose your job.
If you’re struggling to build an emergency fund quickly enough and an emergency does happen, have a backup plan. Like know where to go for same day loans so you can quickly sort things out.
Invest in low-risk stocks and mutual funds.
While there is always some risk involved in investing, you can minimize it by choosing less volatile investments.
Some examples of low-risk investments include government bonds and blue-chip stocks. You can also invest in mutual funds that focus on stability and growth.
I’m a big fan of putting money into premium bonds. It’s very low risk and gives me a chance to win cash prizes every month. It’s worth it when interest rates on saving accounts are low.
Speak to a financial advisor.
They can help you understand your options and make informed decisions about how to invest your money.
Rent a room out.
If you have extra space in your home or apartment, consider renting it out on Airbnb. Renting your extra room can help you offset the costs of living, and it’s a great way to meet new people from all over the world.
If you’re not comfortable with strangers staying in your home, you can also rent out your space for storage. Consider renting a room for storage if you live in a city with high rents and limited storage space.
Cut back on unnecessary expenses.
During a recession, it’s essential to cut back on unnecessary costs, such as cable TV, eating out, and vacations. Instead, focus on spending money on essential items like food and shelter. I recently cancelled Netflix and Spotify as I didn’t use them much.
You can also save money by cutting back on your commute. Work from home a few days a week or take public transportation instead of driving.
Buy your groceries in bulk to save money.
Purchase non-perishable goods from wholesale stores and cook your meals in advance. Consider purchasing rice, beans, and other grains.
Find new ways to make money if you’re struggling to make ends meet.
One option is to start a side hustle. For example, consider dog walking and freelance writing. Search for freelance gigs on Upwork, Freelancer, and People Per Hour platforms. Matched betting is a good one to look into!
You can also sign up to gig apps like Uber, DoorDash, and Instacart to earn some extra money when you are not working on your full-time job.
Another option is to sell items you don’t have to use, like old clothes or shoes. You can sell these items online or at local garage sales. You can also make extra money by purchasing used items from thrift stores and selling them on eBay or Facebook Marketplace.
Finally, stay optimistic.
Remember that this, too, shall pass. Things will eventually get better, and you will weather the storm. So, stay strong and keep your head up. Things will ultimately improve.
A recession can be a difficult time for everyone involved. However, there are some steps you can take to weather the storm. These include building an emergency fund, investing in low-risk stocks and mutual funds, and finding new ways to make money.
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