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Get Yourself Sorted Series: How to prepare your finances for a recession

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If you’re thinking that we’re heading into a deeper recession you may be right. Like most New Zealanders looking to the future, you might wondering, how can I prepare my finances so that the financial blow is more of a light graze? 

We share five ways for you to prepare your finances for a recession so that you can have peace of mind when the next one strikes our economy.  

1. Is your job or your income from a business possibly in jeopardy? 

The first thing that you need to do is to make sure that you are understanding what risks are coming up for your business or company and/or industry. For most of us, our income is the biggest source of funds that we put towards our expenses, so making sure we still have income when we need it most is important.  

You also need to look at your spending; extra coffees, buying lunch etc. can really add up. Limiting your spending temporarily in the short-term and putting it towards your emergency fund could help you out in the midterm if you’re out of work for 3-6 months or if your income changes. 

You also may want to look at some insurance for the long term i.e. income protection insurance or redundancy insurance for if you lose your job due to a health event or due to being made redundant.

So you want to assess the risk and then adjust accordingly and making sure that you have those emergency savings and potential fail-safes in place for the short, medium, and long term.


2. Are you keeping your investments going? 

The next thing that you want to do is you want to make sure that you are keeping your investments going as these will continue moving you forward financially. It may be easy to lose sight of the pay offs down the track, particularly with long-term investments, when you’re in a tough financial situation. Try to hold onto these or try to keep investing, even if it’s just a fraction of what you were putting in.


3. Lower Your Spending Temporarily 

We briefly discussed this above; when you’re looking at short term risk, you want to see how you can lower your monthly bills and regular expenses and even eliminate certain spending altogether. These may be app subscriptions you aren’t using any more, clothing you actually don’t need, or dining in instead of going out.

Family creating financial plan

4. Save as Much Money as You Can

When you’re lowering the amount of money your spending on a weekly basis, take that money and put it towards your savings or into your investments. This ensures this money is being productive, i.e. you’re putting it towards things that will appreciate instead of depreciate, or that this money will be there in the event that your income does change.


5. Make Extra Repayments

The fifth thing you need to do is reserve any extra repayments. Many of our clients are very savvy and try to put off their short-term debts and mortgages quicker than their given term. By reserving these extra repayments to pay your debts off in one lump sum, this means that if you get into financial trouble, you’ll be able to easily access this money if you need to dip into it.


So there you have it; five tips to make sure that you’re preparing your finances ahead of time and ahead of a recession so that if something changes with your income, you won’t be hugely affected and you can keep moving forward financially.


If you’d like to get an assessment of what’s going on with your finances or mortgage, you can book in a 15 minute financial coaching chat with us and we can discuss your financial or mortgage situation and can help set up a plan on how you can reduce it as well as other debt, as fast as possible.