Beating a recession

Everybody’s jumped on the recession band wagon lately, insisting the big financial end is nigh, so I thought, why be the exception!

Kidding aside –this scare-mongering makes me angry as it may frighten a lot of people unnecessarily. But I’d be lying if I said the hype hasn’t got to me. The notion possessed me that we could sell up and buy a cheap backwater bolt-hole, where we’d have more room to grow veg and a smaller mortgage. But now is not the time. DJ still has to commute into London to work, plus we love where we live.

But a slowdown, rather than a full-blow recession, is probably on the cards. And tightening the belt is a good idea. It’s doing something drastic that’s probably a mistake. Some people are considering selling their houses to realise the equity, and renting with the view to returning to the housing market eventually. But this is pretty risky. What happens if you can’t get back in? Not to mention the money wasted in selling fees and rent.

Cheshire Building Society’s boffins suggest the following strategies to beat a recession:

– taking out mortgage or income protection policies

– saving for a rainy day

– making sure your cv is up to date

– knowing where to go for debt advice eg. Citizen’s Advice Bureau

Sensible stuff. But I’m in two minds about mortgage protection. When I lived on my own I took out a policy. It would pay my mortgage if I got made redundant– and the year before me and half the staff at an internet company were fired so I was nervous it could happen again. But the devil was in the detail. It would ONLY pay out if I earned nothing at all while I was unemployed!

However, Duncan Philp, a senior consultant at IFA Macbeth Currie, told me not all policies work this way and it’s worth having mortgage protection in place, or three months’ mortgage payments stashed away in a bank account.

He also recommends overhauling your finances regularly. “It’s very important to have financial reviews and think ‘what if’,” he says. “People are famous for doing nothing and that’s what energy companies and banks rely on.”

The biggest area to look at, Duncan says, is your mortgage. “It’s at times like these that people need to review their mortgage to ensure they’re getting the best deal.”

The key is to be in as flexible a position as possible. Make sure you have a competitive mortgage product which is affordable but that you can overpay. It’s better to take out a 20 year mortgage, and overpay, cutting it to 15 years, than starting on 15 years and being tied into the payments. And pensions are important, “there’s no point paying into a pension if you can’t feed the children” he says. All pension and ISA payments should be flexible, so it’s possible to stop them if money becomes tight. Also, ensure that your bank accounts are the best on offer so your money is working enough hard.

Other ideas, according to this useful article, and this one are to delay major purchases, pay off credit card debts if possible and scrutinise day-to-day finances to see where fat can be trimmed.

What are you recession beating tips? Leave a comment and let me know.

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11 Responses to Beating a recession

  1. Unknown says:

    Avoid slow horses and fast Women.

  2. Christine says:

    It\’s a case of deciding what you need as essential and ensuring that you have saved enough for emergencies. The left over cash is for spending. There\’s no such thing as a tight budget – just having more bills than income. I\’m afraid that you need to organise the spending so that you have money left over for saving before the worst happens. It\’s filling in leisure time that has developed into the greatest expense and that\’s where the first budgeting can often be made. You just have to be inventive here.

  3. lynette says:

    Make a shopping list before you go, listing only the things you need.    Stick to list.     Use cheaper alternatives such as store own brands, (usually just as good and cheaper, sometimes made by the same supplier)    Don\’t buy things for the store cupboard, you can do this later when money is easier.     Cook enough potatoes for two days, and anything else suitable.    A larger joint than you need for one day can be cooked one day and provide a very appetising meal on the next day, without using the cooking fuel twice.   Use freezer to avoid waste.    Don\’t buy ready meals, its much cheaper to buy ingredients and cook yourself.    A good cookbook is a fantastic investment in your finance and health.

  4. ROBERT says:

    Firstly I\’d say don\’t panic there are billioniares out there who feed panic to make crisises from which they build empires these cycles are caused by them and their henchmen within the media.
    Next live within your means but don\’t forget that other people are relying on your cash to help make their livelihoods so be careful  not to be a tight wad just be prudent.
    Remember if Joe Bloggs job is unsure because you and thousands like you held back too much then soon Joe Bloggs could be you this is what the rich live off, as one firm folds they buy the spoils and await the next plum from the tree.
    KEEP THE TREE HEALTHY FEED THE ROOTS.

  5. stephen says:

    not a lot ..but my i ask were have all the czc2s gone, dont ask misibushi

  6. Malcolm says:

    There is a difference between what you want and what you need, just as there is a difference between what you deserve and what you get.  Learn it, learn to live with it.

  7. Unknown says:

    Dont get into debt.

  8. Patie says:

    Here is a my point however unrealistic in today lifestyle.  We buy a car and we pay for either straight away or pay back what we borrowed in time.  We sell it maybe at the price we bought or get less we rarely get more.   We use to buy a house in accordance with what we can afford now we buy a house with fantasy money and our expectation is that we make hugh profits immediately and the fantasy goes on.  What happened to buying living and enjoying and paying back what we borrowed.  Capitalism or keeping up with the Jones or just sheep and …

  9. Steven says:

    I recently got into a mortgage and the whole recession thing is a lot less worrying if you haven\’t got a huge credit card bill or are using loans to pay off loans. I remember when I was a student I lived on a fiver a week for food – I can do it again if I have to – worst case scenario. I\’m ever the optimist though, but thanks to the Northern Rock thing I was treated more like a buyer than a first time buyer. The bank withdrew all their shiny offers and now I\’m hearing some banks are either stopping mortgage offers or having just 100% mortgages. Here\’s an idea – stop advertising credit card offers until this credit crunch thing blows over. Halifax should stop splurging their customers\’ money on stupid lavish adverts too.

  10. Technogran says:

    I think that a lot of the things that our mother\’s (I mean here those who lived through the war years) are reliable ways to keep your head above water and are just common sense such as don\’t buy things if you can\’t pay cash for them, don\’t borrow from Peter to pay Paul, never use credit so if you wan\’t something and can\’t afford it, then save up for it.
     
    TG

  11. piper says:

    Thanks guys – these are such brilliant tips.

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