Does the thought of the next financial crisis keep you up at night? Do you worry about how you’ll keep yourself and your family afloat? Well, with a little preparation, you can rest assured that you’ll cruise through the next financial crisis. Discover how to brace yourself for a downturn in the economy with Personal Loans Now.
- Why a financial crisis might be on its way
- Why should you prepare yourself?
- Preparing for the next financial crisis
- Benefits of drawing up a budget
- Earning extra
- Planning for increases in the interest rate
- Overpaying your mortgage
As a rule, people fear the unknown, and the thought of a looming, large-scale economic crisis can feel particularly daunting. Unfortunately, no financial institution has a crystal ball to predict the next financial crisis. Only in hindsight do people say that they knew it was coming.
We’ll take a closer look at the possibility of a future economic downturn, why some experts believe it’s coming and why you need to prepare yourself. Finally, we’ll advise you of the best ways to protect your money.
The Next Financial Crisis: Is It on Its Way?
There are several concerning facts that experts say may point to the next financial crisis. One reason for concern was the CBI‘s monthly survey of the UK retail sector in October, which indicated that sales had shown their steepest decline since 2008-9.
A further reason for worry is the fact that UK household debt has reached £200 billion. This staggering number is putting banks on high alert for defaulters. The Bank of England’s Financial Policy Committee demanded that they hold an extra £10 billion in capital as insurance against expected future losses.
Brexit and the uncertainty surrounding it is also making people nervous. Furthermore, the possibilities of rising interest rates, a rapid rise in inflation and a decline in global markets are worrisome. Finally, unexpected changes in governmental policy and taxation are also factors in predicting the next financial crisis.
Why You Should Prepare Yourself for Financial Crisis
As we saw in the last financial crisis, the shock waves from an economic downturn can ripple outward, affecting everything in their path. Instability can lead to unemployment, which impacts the entire economy. Wage freezes and high inflation mean that people have less money to spend and invest less in the economy.
Higher interest rates have direct consequences for those with a mortgage or with consumer credit debts. When people can’t afford mortgage repayments, it leads to a rapid increase in evictions. Repossession of these properties can depress the housing market, and house prices will plummet.
in general, a financial crisis will affect every single household in the UK to some extent. For all these reasons, it’s important to prepare yourself and your family. But how can you get yourself ready for this real possibility?
How to Prepare for Financial Crisis
The Benefits of Drawing up a Budget
If you don’t have a budget in place, now is the time to draw one up. Prepare an overview of your monthly expenditure so that in a crisis, you’ll know exactly where you can make the necessary cuts. Familiarize yourself with your spending habits and identify extras you can do without in case your salary gets slashed.
As part of your budget, look at your household bills for your energy needs and phone/broadband access. Shop around using price comparison websites to find better deals. Switching providers can save you hundreds of pounds every year. These savings add up quickly, and you can add them to your emergency fund.
A budget can make you more aware of your spending habits and give you ideas about cutting down on your expenses. The cash you save can be put aside in an emergency fund. Build these savings up gradually so that they reach the equivalent of 3-6 months of your expenses. If a crisis occurs, you’ll have some money to fall back on, and you won’t have to resort to payday loans while you figure things out.
Could you Earn Extra?
Doing overtime or taking on a part-time job in the evenings or over weekends are all ways you could increase your income. Putting aside these extra savings can help you further prepare for the next financial crisis.
If you have an extra furnished bedroom in your home, you could rent it out. Any money earned up to £7,500 a year is tax-free. This contribution can make all the difference between keeping up with your mortgage repayments and losing your home.
Plan for Rises in the Interest Rate
Despite the recent increase in interest rates, debt is still relatively cheap in the UK. However, the Bank of England has hinted that interest rates may rise in the future. With this in mind, avoid committing to mid- or long-term loans. Not only are they a drain on your income, but higher interest rates will bring up the price at a time when every penny counts.
If you need to borrow, protect yourself against future uncertainty by locking yourself in a more affordable fixed rate. This will help you avoid the skyrocketing interest from a variable rate during a financial crisis.
Overpay your Mortgage if Possible
If the terms of your mortgage allow you to make overpayments without any penalty fees, then do so. This gives you more options if house prices crash due to a financial crisis, and is especially important for first-time buyers. With a deposit of only 10%, first-time buyers can easily get stuck with a devalued property which is impossible to sell or re-mortgage.
You may find financial news boring, but make an effort to keep up with what’s happening in the world of finance, at least on a basic level. From interest rates to credit regulation, all of these changes have an impact on your day-to-day finances. Knowing the facts will help you make informed decisions about financial products and services, and keep an eye out for financial crisis.
Nobody knows when the next financial crisis will be, but preparing for it can give you greater peace of mind. Practising responsible earning, spending and saving will help you build financial stability and protect both your money and property in a financial crisis.