Q: I’m hearing a lot of talk about an impending recession and it’s hard not to feel a bit panicked. Is there anything I can do to try and prepare my finances for what could be coming?
A: There is plenty of talk about a recession at the moment, and most of us are watching and waiting to see what the outcome will be. If you’ve been following us for a while, you will know that a huge theme for our rainmakers is accepting and distinguishing between the things that you can control, and those that you can’t. As you know, we can’t really control if the recession comes, how long it last, or how hard it will hit. We can however make sure that we are building our financial resilience so that we can weather the storm, should it come.
With this in mind, here are a few things you can do to try and prepare yourself for a potential recession:
1. Hold your nerve
A recession is going to mean that markets plummet, which will inevitably impact investments. Feeling that your investments could essentially go down can understandably trigger a degree of panic, and you may feel the urge to remove your money and place it somewhere ‘safer’ for the time being. However, as we always say, please hold on and focus on the long term. Markets rise and fall, things change, and no recession in history has ever lasted forever. Yes, markets may be (even further) down, but they will recover eventually.
2. Try to and minimise debt
Focus on paying down any debt you may have, especially anything that is high interest. And if you’re in a position to refinance any debt, whether switching on to a more predictable fixed rate mortgage to avoid escalating variable rate payments, or swapping your credit card to a lower rate or 0% interest balance transfer then do it. This is when a solid credit score can really help.
3. Build your emergency savings
We don’t know exactly how a recession might impact us financially, so having some emergency cash to see you through any shocks could really be invaluable. And importantly, if you already have emergency savings don’t be afraid to use them if you’re feeling financially precarious (we talk all the time about building them but not so much about when to dip into them!).
4. Think about additional income streams
A recession could leave you feeling the financial squeeze, and as we have already learned from the current cost of living crisis, budgeting and cutting spending will only ever take you so far. So, why not explore additional ways to boost your earnings? Is there a side hustle you’ve been meaning to start, or another area you would like to branch into? Now is a good a time as any to try and up your take home cash, so why no go for it?
A recession is understandably a worrying prospect. However, please remember that any recession that arrives in the coming months is not the first, nor will it be the last recession to hit us. People and markets alike have recovered in the past, and providing we prepare, and build our financial resilience, we will recover again.
Do you have a question you’d like Dav to answer? Email us and let us know. All responses are opinion only and do not constitute financial advice