In the current more complicated economic environment, experts foresee a new crisis and already point to an economic recession. Then, the time has come to prepare financially to face another difficult time for your family budget.If at the time of the Covid-19 pandemic you already took measures to contain and reorganize your budget familiar you are already familiar with some of the measures we are going to cover in this article. But if you didn’t do it then you should do it now, and so prepare yourself financially for the next few years that are expected to be difficulteither by the increase in fuel and energy or by the general increase in prices, that is, in inflation.
Start by making a monthly budget
This is certainly the first step in preparing financially for the recession. Knowing how much monthly disposable income you have is knowing how much you have to spend during the month. this is your base. You cannot spend more than your income, otherwise you will have to go to your savings account or worse, go into default or have to take out credit. account for your monthly expenses and group them into categoriess: loans, household expenses (electricity, gas, water, telecommunications), insurance, food, clothing, among others.By making categories you will see that it is easier to manage your expenses. The other big advantage of making a monthly budget is know for sure where you are spending your money. In other words, you are managing your money correctly. What can help you in times of crisis. But remember, “life is for living”. Therefore, create a leisure category.
Analyze your budget
If you make your monthly budget, the next step is to understand where are you spending the money and where can you reduce spending so your budget doesn’t slip. Review each category and see where you can save. Then, throughout the month, record everything you spent in each category. It will be easier to see if you have actually managed to spend more efficiently or not and so prepare to resist in times of recession.
Change your behavior on a daily basis
Did you know that some of your daily gestures and habits translate into costs and therefore in increase in your expenses? And some we do without being aware of it. Others simply because of inertia or because we don’t have much time to change our attitude. Turning off the faucet while brushing your teeth is an example of the former, not reviewing your insurance policies is a good example of the latter. If you identify with both examples, “get to work”. Change your habits. Also read: Not spending money? “New fashion” of saving shows how it is possible
Changing small gestures can mean reducing monthly expenses
if the electricity bill is going up think about what you can do to reduce it: Change incandescent light bulbs to led light bulbs; Insulate the windows of your house in order to prevent heat from escaping, as 60% of the energy in the systems change to the bi-hourly tariff; appliances instead of leaving them on stand-by;Use washing machines at full load and on a low temperature program;Turn off the lights when you leave a room;Change heating is wasted in this way by raising the electricity bill;Reduce the number of times you open the fridge door.These measures are not exhaustive, I’m sure you can find others that will help you reduce costs. And consider doing the same with the water and gas.And when having breakfast outside the house, going every day to have coffee at the bakery next to work or buying tobacco every day? If they give you pleasure, you shouldn’t cut completely either. Record how much you spend on these little things and then just reduce the amount you spend.
Make a shopping list before going to the supermarket
This is one of the main topics today, as food prices are on the rise and, of course, it has to find strategies to combat the crisis and prepare financially for the recession.Start by making a meal planning of the following week. See what you have at home and what you need to buy. Make a shopping list with these products. Add a column of products you usually use at home: rice, pasta, olive oil, among others. These, even if you don’t need them that week, are worth buying if they’re on sale. Follow your shopping list to the letter. To this advice we add others, namely: Use and abuse the discount coupons that some supermarkets offer; Take advantage of promotions; Buy white brands; Compare prices in supermarkets in your area. Buy where it is cheapest.
Enjoy leftovers from meals.
if made extra food in a meal don’t waste it. Go to the internet where you can find good ideas. Ask your children for help and make a meal of leftovers and snacks. The family will love it and so will your monthly budget.
Avoid impulse purchases
We are all tempted to buy a product we find at, for example, 80% off. Pseems to be a real find. Really? Try to resist and don’t buy on impulse. Your budget will thank you. Also read: Avoid impulse purchases: Adhere to the 72-hour rule
Do not use credit card
If you regularly use your credit card, this tip can be difficult to follow. It is, in fact, a matter of discipline, but it is also a way to prepare financially for the recession. Think the rule is: spend in the month only what you earn that same month. So, when buying with a credit card, you are buying not with the income of the month, but with the income of the next. So, consider not using your credit card. Pay by debit card or cash. If you pay with cash, you will even have the idea of money coming out of your wallet.
Pay off credit card debt
If you pay your credit card in full, that is, 100%, this topic is not for you. But if you have one installment payment, you should consider ending your credit card debt. It’s one more step to financially prepare for the recession. On your statement, see how much interest you’re paying for the amount you left to pay the previous month. See not only the value, but also the interest rate. The rate will certainly be high and even higher than that fixed by the Bank of Portugal on a quarterly basis. This is because the rate disclosed by the central bank is valid for new cards and not for old ones. At financial entities are not required to update rates.So you can change the payout percentage whenever you want. And equate, for example, make extraordinary payments until the debt is settled.
If possible, write off credits. If you have money invested compare the interest rate you are being paid with the interest rate you are paying on your loans. It’s definitely lower. The first step is to analyze all the credits you have considering the type of credit, the monthly installment, the payment term and the amount that remains to be paid. In between personal loans and home loans the former have a higher rate, so it’s a good option to start here. Then, you can choose: for the one with the highest installment or for the one that is closer to the end (and a lower amount to pay). When you manage to close these credits, go to the mortgage loans. Remember, by lowering the amount owed on your home loan, you will not only lower your monthly installment, but also what you pay for the life insurance to which it is associated.
Consolidate or renegotiate credits
But although amortizing credits is a good financial decision, it is not always possible. But there are other ways to face the crisis by reducing the financial burden. Talk to your bank and try to renegotiate your credits. Or join them all (housing and personal) in a single credit, making your consolidation. This way, will reduce your total monthly installment.Read also: Renegotiate credits: 7 tips that can help your financial situation
Review your insurance
You should review your insurance at any time, but even more so to prepare yourself financially for the recession. Competition among insurers is strong and there is a high probability of finding insurance with the same coverage and with a lower premium.We are talking about all insurances: multi-risk, health, car and above all life insuranceThe. Remember, the premium you pay for increases a lot with age, especially after age 50. So, try to find an identical insurance with more advantageous conditions.
Review service provider contracts
With the increase in electricity, see if there are any advantages in changing energy supplier or if you are in the free market in returning to the regulated market. Also see if changing telecommunications operator is also more advantageous for you. Once again, the competition that exists between them can be beneficial to you. Take advantage is another way to prepare financially for the recession
Make or maintain an emergency fund
Have one emergency fund is even more important in times of recession. This fund is intended to cover both unforeseen expenses and unexpected drops in income and should have the equivalent of six months of fixed expenses (the ideal would be 12 months). But if it is an unforeseen expense not considered in your budget, if you have this fund you can use part of it, without having to resort to a personal credit or credit card (solutions you should avoid). And, of course, replace the amount you spent as quickly as possible.