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