The alarm bells are sounding on the SA economy & economists found a 100% likelihood of a recession in the coming year. That means it’s probably time to take action to protect your finances.
1. Build an emergency fund
The experts advised building up an emergency fund to cover your expenses if you lose your job. Such a fund would ideally cover three to six months’ worth of expenses. If you don’t have three to six months’ worth of expenses saved up, you’re going to need to spend less and save more to get there in 2023.
2. Trim your regular outgoings
Thinking hard about everyday expenses can help you find savings. Such an exercise often requires the least effort and bears the most fruit. Bundling your car insurance and home insurance together, finding a cheaper cellphone or internet contract, reducing the number of streaming subscriptions you have, and making your own coffee and lunch rather than buying them every day can prove to be easy wins for cutting regular spending. Paying off your highest-interest credit cards in a time of rising rates can be the most effective way of reducing debt.
3. Cut major expenses & squeeze more out of your home
Cutting costs like streaming subscriptions can lead to small and worthwhile savings, but expenses such as these nonetheless pale in comparison with the core drains on your finances.
The cost of running a car is usually higher than it needs to be and can be a key source of indebtedness for many. If there are two vehicles in your household, now might be the time to consider getting rid of one and joining a car-sharing club, buying a bicycle or scooter, taking public transport, or walking if you are able. Housing is the biggest expense for most people and can seriously move the dial on your financial resilience. It could be a great idea for homeowners to think about renting out spare rooms, or opening them up to AirBnB. Income can also be found from unwanted possessions around the home. Looking around your house and saying ‘what can I sell for money? – is another way of getting some cash for little work.
4. Look for side-hustles
If you have the time, finding additional income (multiple stream incomes) options are now available in South Africa. Teaching a skill in your spare time, joining as a consultant for direct sales, or working in the evenings doing something you love in the hospitality industry for example are a few ideas to earn extra income. Ever considered turning that hobby into an extra revenue stream? Now is a good time. Dog-walking, babysitting, answering paid online surveys, and gardening can also help bring in extra cash.
5. Find sources of passive income
“Drop-shipping” — acting as an intermediary between a supplier and customers – affiliate marketing, and earning advertising income from websites are some ways you can build passive income streams. Some people have bought vending machines and rented sites to place them. It’s important not to sink too many up-front costs into passive income streams in the hope they’ll bear fruit.
6. Upskill
The negative effects of a recession, like falling income and higher unemployment, may not become evident until some months into the downturn. That leaves plenty of time to build up a new monetizable skill & take time to upskill yourself. There are so many free online courses now that allow you to bolster those skills.
7. Transfer extra income into a savings account
Once your finances are on a better footing, you should begin automatically transferring additional income into a savings account you can’t easily access, to stop the temptation to spend. Save, save, save should be your words this year!
8. Don’t panic!
The worst thing you can do with a downturn on the horizon is act rashly. Now is the time to ensure your finance fundamentals are on the right track — and not necessarily to pull money out of investments. If you’re already an investor, it’s important not to panic and keep your mind focused on long-term goals. Continue investing. Remember, investing regularly over a long period of time works.
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Don’t try to pack in all these suggestions at once, for risk of getting overwhelmed. Start slowly, but START! The rest will follow.
