With 2023 peeking over the horizon and fears of recession coming with it, you may be wondering if the economic weather will be rosy or stormy. With inflation sitting at 6.1% and interest rates set to rise even further, making one’s dollar go further is the number one priority at the moment. So how can you sit pretty, no matter the economic climate? We have some tips so you can get ahead over the coming year.
Re-evaluate or create your budget
If you already have a household budget, it’s time to re-evaluate it to ensure you can weather the storm – or redirect it to paying off debts. (More on that later.) If you haven’t set one up for your household, now is the time.
Before making a budget, you need to know where you stand. Before you can keep score, you have to make sure everyone is on the same level. That means you have to figure out how much money your family makes and where all of it goes in bills.
That means getting at least two months’ worth of bank statements and starting to organise where your money goes: house payments such as rent or the mortgage, utilities, food, education, kids’ needs, clothes, debt repayment, transportation, and luxuries. If you notice you’re spending a lot of money on luxuries, it’s time to turn off that tap and put that money to better use.
If you already use online banking, you can take advantage of it. Many of them can help you plan for your expenses when they come in each month or fortnight.
Consolidate your debts
Do you just pay the minimum on your credit cards, plural? Minimum payments on a credit card will perpetually put you behind, as the high interest on your balance increases over time. The goal is to get as close as possible to being debt free. Consolidating your small debts is a way to have more freedom with your money. That means taking out a competitive interest rate personal loan, paying all your debts off in one hit, and making regular repayments until that balance hits zero. Cut up the high interest credit cards and perhaps leave a low-rate one open in case of emergencies – but don’t splurge!
Though inflation will eat away at your purchasing power, this is the time to start saving for emergencies. If recession hits and job cuts occur, you may be able to ride things out until things improve. If you emerge on the other side relatively unscathed, you could use some (not all!) of savings to invest, take a holiday, or buy a big-ticket item for the family.
Get financial help
If all this seems overwhelming, we understand. Not everyone is a natural accountant and may need help and advice with their finances. Seek assistance from financial advisers, especially those who can give you guidance around personal budgeting. It can go a long way and help you get ahead and stay ahead when it comes to finances.
This is a sponsored article produced in partnership with Savvy.