Make sure your money is recession proof

According to the International Monetary Fund’s (IMF) World Economic Outlook, global challenges such as the Covid-19 pandemic, high inflation, volatile markets and the war between Russia and Ukraine have contributed to a capricious situation that will see global economic growth drop in the new year, from 6.0% in 2022 to around 2.7% in 2023.

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In short, we are on the brink of the world’s next economic recession, said Tasnim Alli, Insights & Innovation Lead at Metropolitan GetUp.

“Within a South African context, this will cause our cost of living to rise, as everyday necessities like groceries, transportation and clothing become more expensive.

“As the economy contracts, there are also likely to be job cuts, which will cause finding a job much harder, spiking South Africa’s already-high unemployment rates even further.”

She adds recessions are more commonplace than we realise. When economies reach a peak, the natural progression is a downturn.

They hurt the finances of consumers already experiencing high levels of financial pressure.

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“Recession-proofing your finances is the best way to protect yourself and your loved ones, helping you navigate the choppy waters that lie ahead.”

Alli shared several ways consumers can start to tighten up their finances, creating a safety net for the new year.
Understand the cost and worth

Before buying, ask yourself, ‘what is the cost of what I am buying and what is it worth to me?’

“Often, we go for the cheapest product to save some cash, but we may be sacrificing quality at the expense of longevity, causing us to spend more in the long run when we need to replace that product,” said Alli.

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“Or we splurge on something that has very little value to us, yet comes at a high cost because it offers convenience or makes us feel good.”

Interrogating the reasons why we buy allows us to make better, more informed financial decisions, causing a shift in our spending behaviour.

Tackle debt – quickly

Look for opportunities to either pay off or reduce your debt because as inflation spikes, banks raise interest rates to curb this, which means your debt will suddenly cost you a lot more.

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Can you change your spending habits and redirect some of these savings towards paying off your loans?

“The quicker you repay your debt, the less interest you pay. If you owe a great deal of money, look at debt consolidation offerings.

“This can help by managing and reducing your monthly repayments through restructuring your debt to ensure affordability,” said Alli.

Don’t over-insure

It may sound counter-intuitive, but the reality is that having multiple policies which offer similar features and benefits can often impact your affordability, setting you back.

“You may think, if something happens to one of my policies then at least I have another! Yet the more funeral cover you take, for example, the more expensive your monthly payment will be, warns Alli.

“And if you face financial trouble, it could lead to you losing your cover because you can no longer afford it.”

She suggested reducing your coverage or benefits to ensure that you can continue paying your monthly premiums and retain the bulk of your protection.

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Create a cushion

Whether through not buying costly take-outs or skipping that daily coffee from your local barista, redirecting savings into a savings plan will help create a cushion for you as you prepare for what is to come.

Hunt for good deals and flexibility

Hunt for good deals and flexible offerings from reputable financial services providers. For example, if you are in the market for funeral cover, Metropolitan GetUp offers policyholders the option to skip their premium payments in January, while retaining their cover.

“The holiday period is renowned for road accidents so being protected is crucial, said Alli.

“In addition, January is often regarded as the longest month of the year because we usually have very little money due to holiday spending.

Through premium-skip options, you remain covered but get some financial relief, resuming your premium payments in February once all the craziness has died down.”

Alli added it is important to find a flexible insurance provider who understands your circumstances and offers support during difficult financial times.

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This can include allowing you to pay what you can, when you can, or allowing cash or instalment payments in addition to debit order options.

“Selecting a provider that has relief mechanisms, catering for when times are tough, such as part payment and payment skip options, allows you to add and remove benefits according to your current needs, helping you weather the looming recession that much better.”

• Supplied by Metropolitan GetUp

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