Saving for Tough Times

When fighting your way through tough economic times, it is better to try and face down these money troubles instead of closing your eyes and hoping they’ll go away. They won’t. There are many steps you can do to minimise the impact of the economic downturn, and they must be taken now.

Accumulate funds for emergency savings. It is important to save money in an emergency savings fund where you have immediate and penalty-free access. As a general rule its good to have enough in your savings to survive without an income for around three months. The best place to park this money would be in a high interest savings account.

Save more. Try to arrange for an automatic savings plan. This arrangement enables you to set aside specific amounts of cash automatically transferred from a checking account to savings accounts earning high interest or to a mutual fund of your choice. A high interest savings account should be used but you should choose one with easy access. A retirement fund will not do it because this is money you won’t need for quite a while.

Spend less. This move may be obvious, but it can be a very hard step to take. Lump into one account all the phones at home (landline and mobile). By bundling your communications you can normally get substantial discounts. You should compare the deals on the market to find the best value deal. Spend less on your groceries by joining a food co-op or buying only generic or supermarket brands. Bum rides in a car pool or take public transport instead. If you have two cars and one is seldom used, consider selling the other one. Put all the money you save in a high interest savings account intended for the rainy days.

Reduce credit card debt. You have to find ways to stretch your money further in tough times. It does not make sense to shell out your hard-earned money to pay 17 per cent (or whatever) interest on credit card debt. Try to pay off in full the balance due each month; if that is difficult, at least pay much more than the minimum amount. Consider moving from credit to Visa debit

Increase household income. During a recession this can be difficult. You may be able to find creative ways of bringing in additional funds using your skills. If you write, or do photography, or are able to do some other marketable skills, you can try freelancing on your spare time. In single income households the partner could try and take on casual or one off jobs for extra income. You could start a small business which might blossom into something bigger once the recession is over.

Make use of allowable tax deductions. Be on the lookout for tax deductible expenses such as education, charitable donations and your home office. Be religious about keeping every related receipt, so you can use these to support tax deduction claims. Put the money saved on personal tax deductions into your high interest savings account.

Spruce up your résumé. Recessions can lead to more layoffs. It is best to polish the résumé to make it current, in case the need to apply for a new job arises. Try and get the resume down to one or two pages to keep it to the point. Make it presentable, but not flashy. Highlight your relevant work skills and experience.

Act quickly to protect your finances from the recession. This will give you a strong sense of purpose even as it shores up your position.