How To Manage Your Finances During A Recession
The UK is on the brink of going into a recession, it is highly likely that at the start of 2023 it will happen. The problem for many households at the moment is that they are already dealing with rampant inflation, running at around 11% meaning the cost of the living is going up and wages simply aren’t doing so more and more people can no longer live at the level they are accustomed to. If an average household used to make £50,000 per year and they had around £10,000 disposable income, this increase to living costs will reduce that disposable income by over £1,000 meaning that either some sacrifices will need to be made or you would risk going in to debt to maintain your current lifestyle.
Analyse Your Spending & Cut Costs
Most high street banking apps now have functionality built in to them that categorises your spending and if it doesn’t there are plenty of 3rd party apps you can use to manage your finances. When you go on to the app there is a section that will tell you how much you have spent on various things like groceries, subscriptions, bars/restaurants etc…to give you a better understanding of where your money is going and where you can cut back. We are now a few months in to the cost of living crisis but most people haven’t really tightened the purse strings yet as we’re in the build up to Christmas. From January people will no doubt really cut back on spending.
Subscriptions
The one thing that has been become apparent as people have analysed their finances is just how much money you can spend on various subscriptions without being aware of it. As most subscriptions tend to cost between £10-£20 per month you don’t tend to notice how much you are spending but when you add them all together it is a surprising amount. The most popular subscriptions are Netflix, Amazon Prime and Spotify but there are many more like sports ones including BT Sport, Sky Go and DAZN. For just Neflix, Amazon and Spotify you will in all likelihood be spending around £50-£60 per month and then if you add on a couple of sports subscriptions you will be up to £100 per month in no time. That £100 per month works out at £1,200 per year and covers the £1,100 you have lost because of inflation. Take care to look through your subscriptions and make sure that you can access every subscription you’ve taken out. If you accidentally blocked your Bajaj EMI network card or any other finance card, learn how to unblock Bajaj EMI card easily.
Personal Debt & Credit
It is always tempting to try and live beyond your means and maintain your lifestyle because you figure that things will go back to normal but in reality prices never go down, they only go up slower or faster so it isn’t like you will all of a sudden get a lot of money to pay back. You may want that holiday to the Italian Riviera but instead of sticking it on a credit card or financing it, just forgo it for a year to keep your finances in check. If you do happen to get in to trouble then make sure you do something about it as soon as possible before you reach bankruptcy. There are many tools out there to help you, one of which being an government legislated IVA. Have a look at an IVA Calculator to find out how much your monthly repayment could be reduced by and how much debt you could have written off by using an IVA.
Business Debt
As is the case with your personal finances, your business can go in to debt, in fact it’s actually much easier to go in to debt because you tend to have more fixed outgoings. In addition to this your personal money will come from your business so they tend to be tied to each other. In a similar way to an IVA, there is also a business equivalent called a CVA or Company Voluntary Arrangement. A CVA can help you avoid winding up petitions, being taken to court and get bailiffs called off to give you breathing space to make repayments.
It is very easy during hard times to bury your head in the sand and think it will go away, unfortunately it won’t do, it will only get worse as interest racks up on your debts. For this reason, always seek advice as soon as possible when you find yourself getting in to difficulty, the quicker you can do this, the quicker you can recover from it and start looking forward to building again.
