How I’m Recession-Proofing My Finances

Prepping for the Future…

After talking about it on my Instagram, I’m here with my post on how I’m recession-proofing my finances. Over the past couple of years, I’ve become obsessed with personal finances. I’m always listening to a financial podcast. Now, with the current times and the recession coming, it’s really time to start thinking about how to prepare for it.

Now I’m no financial person and I urge you to seek financial advice from an expert before doing anything. I am someone who is self-taught and these measures that I’m putting in place steps that feel comfortable to me.

Savings.

First, let’s talk savings. Probably the smartest thing you can do right now when it comes to recession-proofing your finances. For me, I have several saving pots for different things. And whilst I would love to fill all the pots, there are three that I’m consentrating on.

The first being my emergency fund. This is a pot of money that you allow to sit there. It is usually three to six months worth of income, allowing you a buffer just in case anything happens. It also gives you some freedom that if you needed or wanted to make a change, you’re not force into decisions. Now, this emergency fund sits separately from your other emergency funds, like your car pot or home pot. With mine, I’m almost there, but I would love to add a little extra to feel secure.

The next one is my house deposit pot. Now, I doubt we’ll be buying a home any time soon. However, the one benefit of a recession is a decrease in the housing market. And whilst I feel sorry for home owners, as a first-time buyer, it will be my time to shine. So whilst I won’t be putting so much money in there as I usually would be, it is still worth continuing adding to the account to keep it growing.

The final pot I have somewhat mentioned is my other ’emergency’ pots. I have several categories for what I’m saving for, but there are several pots I want to fill. These being car, Dash and home. I want to make sure I have enough funds in there because should anyone of these have a sudden expensive bill, it wouldn’t be good.

Overall, the aim with savings is to be prepared so that I can actually enjoy the rest of my money.

Pensions.

Sticking in the savings part of recession-proofing my finances, now is the time to really start investing into my pension. If I’m totally honest, I started too late, I was never really educated on the power of it. Now, I’m on it, putting in 5% with an exact match. Now, I’m tempted to stress test and see how we would cope if I put this up to 11% in total. It’s worth putting in as much as possible, your future self will thank you for it.

If you’re unsure how much you should be saving for your pension, you need to calculate your ideal retirement salary and times it by 25. Now, that number may be scary, however, the power of compound interest is going to be your best friend. If any of you readers are in your early twenties, start saving now! The earlier you start the more you’ll gain from compound interest, the more you’ll be able to sail off into the sunset.

Investing.

Now, you may be tempted to stop investing or completely withdrawal your investments all together. Please don’t do this. Right now the market is slumping and if you take out your cash, you will lock in your losses. History has taught us that right after a recession, you see a massive spike and that’s when your investments are going to take off. Now, you might not be investing a lot. You might not be investing at all. Even starting small will make a difference, so put that £10 a month into an account and see how you do. Better still, open a stocks and shares ISA like myself on Moneybox and round up your spending and invest it into this account. Honestly, I don’t miss the spare change and I’ve made a pretty decent dent into saving more for.

When it comes to investing and what type, it depends on your age. The younger you are, the more risks you can take. Right now in my thirties, I’m looking to put 30% into bonds (low risk). Depending on your age is the percentage amount you should consider.

Caring For Yourself.

The most important thing is to make sure you care for yourself during this time. Saving is important, but so is having a little joy in your life. So if you have a routine of every Friday grabbing a coffee and a croisant on your way to work, please don’t forgo this for the sake of putting it away. Firstly, it’s not going to make a massive difference. And secondly, it’s a little self care that’s going to pay off in the long run. It’s important to take care of yourself, so that once we are on the otherside, you can really enjoy life.

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