With a recession upon us, there’s never been a more important time to get your finances into shape. By following these three golden rules you can change your relationship with money, take stock of your current financial situation and help prepare your family for what may lie ahead.
1. Build an emergency fund
You’ve likely heard people talk about saving for a rainy day, but building an emergency fund for your family can be very useful in helping you navigate a recession. Virginia Marshall, our Chief Financial Officer at Society One, recommends putting money aside now to avoid the stress associated with paying any unforeseen expenses, “Try to save enough money to cover three to six months of expenses. This may help you avoid having to access additional credit to pay the bills and meet your debt repayments if you were to lose your job or have your weekly hours cut.
“Recessions, much like the one we are entering, can often bring job losses and reduced hours, especially for those in part time positions. Unfortunately, this generally translates to higher rates of female unemployment, as women account for close to 70% of Australia’s part time workforce.
Having a few hours or days of work cut due to a recession, could have a real impact on many households across the country, so it’s important to prepare for these events before they happen”, Virginia said.
2. Live within your means
Although it might be fun to splash out on a few luxuries here and there, it’s a good time to only spend what you can actually afford. Make use of a budgeting tool or app to help you identify where your hard earned cash is currently going, and sit down with your family and talk frankly about where the next few months will take you.
“Discussing your current situation with the whole family will ensure everyone is on the same page and feels they have a voice in the conversation. From a spending point of view, focus on taking care of the necessities first, including bills, groceries and debt repayments, before indulging in expensive dinners or family days out”, Virginia recommends.
3. Consolidate your debts
To help you get a better handle on your family’s expenses, using a personal loan to consolidate your debts can make it easier to manage your repayments by paying one monthly repayment instead of separate payments for each loan or line of credit you may use. According to Virginia, “What many people might not know is that consolidating your debts isn’t a difficult process and, with the right interest rate, could actually see you save money in the long run. It can also help to maintain a quality credit score by paying off debts on time, putting you and your family in good stead for the future.”