Stay Money Calm through a recession

Although the UK economy is currently suffering, there are steps you can take to shore up your household finances

Using a debit card

The UK officially fell into recession on Wednesday (8 August) for the first time in 11 years.

Although this was expected after the impact of the global pandemic, the figures still brought home the financial reality of Covid-19.

Being in recession means the domestic economy shrunk for two consecutive quarters. Figures released from the Office of National Statistics showed it was down 20.4% compared to the first three months of the year due largely to the closure of shops, hotels, restaurants and schools.

The last time the UK was in recession was following the 2008 financial crisis and prior to this it was 1990-91 which saw high inflation and then interest rate rises.

Despite all this, there are ways you can help improve your personal finances. We’ve provided 15 tips to help.

You might also want to read our guide on ‘What does coronavirus mean for your family finances?’’

1. Draw up a budget

Spending a little time auditing what is coming into and out of your account on a weekly or monthly basis is always worthwhile. 

Many of our habits have changed since Covid-19 and so too have our spending patterns.

If you have some cash left over every month, then consider putting the extra away in a savings account.

If you’re spending more than you are earning, see where it’s possible to cut back. 

2. Set up and cancel direct debits

Setting up a direct debit on your credit card will mean you’ll never be hit with a late payment charge because you have forgotten to pay it. Direct debits can also make budgeting easier.

Cancelling direct debits for subscriptions you no longer need or only signed up to for the introductory offer can also save you more than you think.

3. Find cheaper insurance

Go through your insurance premiums one by one to see when they are due for renewal and if a better deal is available.

If you’re a homeowner, you might find it more cost effective to buy buildings and contents insurance from the same provider.

Don’t just accept the renewal quote from your current car insurance provider, as it’s unlikely to be the cheapest option. You could get a new quote in less than 5 minutes and save as much as £284*.

If your car insurance still has months left to run and your driving habits have changed since the pandemic, contact your insurer to see if you are due a refund.

Once you have found the insurance deals you want, also consider paying for the year ahead. Although this means more upfront, it often works out cheaper than monthly premiums.

4. Move your credit card debt

If you’re not clearing your card balance in full every month then you will be paying interest charges.

Look into shifting your outstanding balance onto a balance transfer credit card which can offer interest-free repayments for up to 28 months giving you time to pay off what you owe.

Representative example: If you spend £1,200 at an annual rate of 19.9% (variable) p.a. your representative APR is 19.9% APR (variable)

5. Switch your energy provider

When the sun’s shining, we tend not to think too much about our heating costs, but as we head to autumn and then winter, our energy bills are likely to rise again. 

If you haven’t looked into switching your supplier recently, it could be one of the biggest household savings available.

You could save at least £286** on your energy bills when you compare with MoneySuperMarket - and if you can’t save, we’ll give you £20†.

6. Cut your mortgage rate

If you’re a homeowner, your mortgage is likely to be your single biggest monthly outgoing, so there might be some sizable savings to be made.

With interest rates at an all-time low there are also some great mortgage deals available, so compare lenders to see what works for you.

You should start looking for a new mortgage around three to six months before your current deal ends. 

This gives you a chance to line up a new one so it’s a seamless transition without you moving on to the existing lender’s standard variable rate and seeing a nasty hike in repayments.

7. Find a better savings account

With interest rates low, the return on savings accounts isn’t great at the moment, but every little still helps and if you can put a bit away each month it’s a great habit to get into.

You can also save your money tax-free by taking advantage of the £20,000 ISA allowance for 2020-21. You can compare the different types of ISAs and choose the one that is right for you  here.

8. Find a cheaper mobile phone deal

There are several ways to get a better mobile phone deal. It’s always cheaper to switch outside of your contract, so to see how long you are tied in.

Calculate how much data, minutes and texts you use. While you don’t want to pay for more than you need, the biggest costs will come from charges if you go over your limit.

You could look for a SIM Only deal and use your current handset. Or if you’ve had enough of your old device you could even sell it for cash.

iPhones, IPads and the Samsung Galaxy S series are among the popular brands where you can recoup some of your initial outlay.

9. Check your credit score

Growing your credit score could help you access a wider range of better deals on credit cards, loans and mortgages.

Several things can negatively affect your credit score, such as missed payments on bills or previous financial woes such as bankruptcy. 

But by checking your score you can take steps to improve it, and if you believe there has been an error you can add a note to your file. 

You can check your score and get access to your full report with Credit Monitor and also get free, personalised tips on how to improve it.

10. Consolidate money you owe

If you have outstanding loans and credit cards all at different interest rates, then it may make sense and save you money to consolidate them on to one loan or credit card at a more favourable rate. 

If this allows you to pay off more of the outstanding balance every month, then your debt will reduce faster.

MoneySuperMarket allows you to quickly compare 35 personal loans currently on the market here

11. Find a better current account

A new current account could offer a variety of benefits such as a free authorised overdraft up to a certain amount, the chance to earn cashback on purchases, or pay you interest on in-credit balances.

Compare the benefits and decide what works for you and then switching should be straightforward.

12. Install insulation

If your home doesn’t have it, installing loft insulation could save you £130 per year in energy bills.

Now is the perfect time because from September you’ll be able to get up to £5,000 of vouchers for green energy-saving home improvements from the government if you live in England.

13. Eat Out to Help Out 

You’ll need to be quick on this one, but during August you can receive 50% off food and non-alcoholic drink in thousands of cafes, pubs and restaurants across the UK thanks to the government’s Eat Out to Help Out scheme.

The deal is valid from Monday to Wednesday each week, and discounts are capped at £10 per person, but there’s no limit to how many times a day you use it.

14. Get an efficient boiler or boiler cover

While it might be a big outlay initially, investing in an energy-efficient boiler can save you in the long run as it costs a lot less to heat your home.

If you’re concerned about something going wrong with your existing boiler then you may want to consider boiler cover to help with the cost of repairs and servicing. Check that it’s not already included in your home insurance though.

15. Make money from your parking space

A final option is dependent on where you live, but with many people’s circumstances changing through the pandemic and more people looking to go to work under their own steam, your private parking spot could become a valuable resource.

There are several websites such as JustPark, Park Let, Your Parking Space and Park On My Drive where you can advertise and make yourself a few extra pounds.                                                       

*51% of consumers could save up to £284.51 Consumer Intelligence, June 2020

**51% of customers that applied to switch via MoneySuperMarket could save at least £286.50, June 2020.                    

† Excludes NI, CI & IOM                                                        

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