With the threat of recession looming, households are looking for ways to keep their expenses low and save more money in preparation. Here we share some of the best ways that households can save money during the recession.
Make a budget and stick to it
One of the best ways to manage your finances is to budget effectively based on your monthly income and expenditure. Analysing your outgoing expenses will help you to see where the majority of your money is being spent and allow you to assess where you could be making cuts. There are many different ways to create a budget but, at the end of the day, you will need to choose something that makes the most sense to you which will help you stick to it.
Experts typically suggest dividing your budget into categories: essential spending (your “must spends” each month such as rent, utilities, groceries, transport), non-essential spending (your “nice-to-have spends” such as leisure activities, holidays and dining out) and savings and debt. Once you have established what is strictly necessary to spend each month, you can decide how to break down the remaining spending, putting some money aside for the future and, if there is any money left over, determining what luxury items you want to pay for.
Eliminate your debt
When interest rises, your existing debt becomes more expensive and you will find yourself having to pay increasingly more each month. Trying to eliminate as much debt as possible is an important step when it comes to preparing for a recession. Although this is not always possible, you should at least be trying to find a low-interest, fixed-rate alternative to keep your monthly debt payments as low as possible. The more debt you are able to pay off, the more money you can keep behind for savings.
Create a rainy day fund
Recessions can often lead to things such as redundancies or temporary periods of unemployment leaving households in a financial emergency. Having an emergency fund stored up can relieve some of the financial pressures should you face unexpected unemployment. Experts recommend always keeping behind an emergency fund of approximately three months of expenses. Though this figure is not always attainable, you should always try to keep a realistic amount of money saved up in case of emergencies.
Reduce costs
In addition to cutting down non-essential spending, you may be able to save money when it comes to essential spending. For example, shop around to make sure you are getting the best deals available with your providers. Be it energy providers, mobile phone service or home insurance, you could be paying more than you have to be. This is also a good time to check out any services or subscriptions that you are paying for and not using. You may find that you are shelling out monthly for things that you no longer use such as memberships, streaming services or subscriptions.
Hold off on those big purchases
As well as cutting out some of those small expenses that add up, such as your daily coffee from the coffee shop, it’s also good to think big when it comes to saving money. Think about whether you really need that new car, home renovation or expensive holiday. In times of difficulty, skipping the big expenses, or at least postponing them, can protect your savings and ensure that you have enough money left behind to support you during financial crises.
Opt for homemade solutions
Learning to replace some of your expensive monthly outgoings with a DIY option to do at home can make a huge difference when it comes to discretionary non-essential spending. Whether you choose to recreate your favourite restaurant meal from the comfort of your home, replace the cinema with an at-home movie night, or disregard your regular beauty treatments for ones you can do yourself, this can all make a huge difference when trying to save money day-to-day.
