The last year or two has seen many people hit hard because of the downturn in the economy. Unemployment has risen steadily, workers have taken pay cuts or had their hours reduced; and to top it all off, it is highly likely that in the near future inflation will begin rising, triggering interest rate rises, which will pile more pressure onto people’s mortgages. There are several things you can do to start protecting yourself and your finances against the worst ravages of the recession.
The most important thing you can do is to start paying down debt, if you have any spare cash available after immediate expenses have gone out of your paycheck. Compound interest is a killer if it is working against you, so pay off all your store cards and credit cards if you can afford to do so. If you can’t, try and find other cards that charge a lower interest rate and transfer your balances from the expensive ones. Over the long term, this can save you huge amounts of money.
Check your mortgage contract to see if it allows “overpayments”, and if so – and if you can afford to – consider increasing the amount you pay off each month. This will reduce the overall interest paid on the home loan, and you’ll pay it off earlier too.
So that covers the negative balances; now think about your current spending patterns. Take a month recording every cent you spend on everything. Write it all down, and explore this data at the end. You will probably be surprised to see how much money you are hemorrhaging on stuff you didn’t need. A bit of frugality now means you can save a little more, or pay off a little more of that poisonous debt.
Finally, aim to create additional income strands to your finances. You can build a whole portfolio of diverse income creating ideas using the internet. They often cost nothing, or very little, to start up, and if you can make time – say, an hour per evening plus a half day at weekends – you may rapidly find your money building up.
Adding all these factors together – managing and paying down debt, living more frugally, and creating extra income streams – you will find that a recession can do its worst, but you will already having armored yourself against it.
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