How to recession proof your finances

October 02, 2020

Scott Morrison’s decision to unleash billions to stimulate the Australian economy points to his government’s burning desire to desperately avoid a recession but unfortunately there was only so much that could be done to avoid this economic slowdown. Australia’s last ‘technical recession’ (measured as two consecutive quarters of negative GDP growth) was 28 years ago, before the country embarked on a world-beating economic expansion. Now some economists believe we’re “officially” in a recession, spurred by the stock market’s downward spiral, rising unemployment and the lockdowns due to virus outbreak in different states. Australians may feel worried about shoring up their finances in these uncertain economic times. So here are some of the ways you could protect yourself during these times. Figure out your ‘number’ Determine your unique ‘number’ to ensure they live within their means during a recession. Essentially, it’s how much an individual or family requires to account for basic living expenses like water, electricity and food, without frivolous purchases like new cars or holidays. Once that number is established, people can then create long-term plans to combat a period of economic downturn, and figure out how much disposable income they have. Average Australia has less than months savings in their back account and where you should have somewhere between three to six months’ worth of savings in a rainy-day account.” Remove any non-essential expenses Australians struggle to comprehend just how much of their annual income is eaten up by direct debit services until they print off their bank statements. luxury items like Spotify, Netflix, Stan and the like- These add up,” Mr Also trying to reduce your expenses, so shopping around so you can get better rates on your loans, better prices on your home and contents insurance, better prices on your health insurance are great ways to save. And it’s amazing what little changes can have when they compound over four or five items over a few months period. If you’re experiencing hardship, talk Australia’s last recession led to double-digit unemployment, and with a growing reliance on the gig economy and workforce casualisation, there’s a high chance more Australians could soon be unemployed specially from 24th Sept onwards as the Jobkeeper and the Jobseeker will be winding down. Australians who find themselves out of a job should speak with creditors and financial counsellors sooner, rather than later. They (creditors) have a legal obligation – if you’re a bank or a telco or energy retailer – to offer a financial hardship provision. Have faith in your plan — and don’t panic Though there are quite a few different opinions out there on how long these dark times will last but investment advisors say Australian investors should be focussed on the long-term dividends of staying involved in the market. Unfortunately, markets are unpredictable, so it makes sense for us to say let’s sit in cash and wait until it’s more comfortable and let’s invest again. But the price you pay for certainty is a very low return. So, if you want the returns that capital markets offer over the long term, you’ve actually got to weather the storm. Find a source of income During these times many Australians are going through hard times as a lot of Australians have got laid off from work due to COVID related slowness in the economy however there is still a hope. The GIG economy is full of jobs and you do not have to wait for a traditional employer to hire you when you can be your own boss and make money on demand if you are willing to put in the work and have skills to complete a task with good customer service in the GIG economy. Go and sign up to www.nextask.com.au and see how you can ditch your traditional employer and recession proof your finances.

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