Five ways to beat the economic downturn

As the economists continue to predict doom and gloom for the economy, we suggest five simple steps to strengthen your finances.

1. Be better at budgeting

The people most at risk during downturns are those who, knowingly or unwittingly, live well beyond their means. Of course, constantly spending more than you earn is a recipe for financial ruin. However, in recent years, raised consumer confidence (bolstered by seemingly ever-rising house prices) has masked Britain’s spendthrift ways. Thus, it’s vital to build a strong foundation to your personal finances by learning how to budget. You can also use lovemoney.com’s free online banking tool to track your spending across different accounts and set yourself an online budget.

2. Massage your mortgage

As with all debts, the secret to a happy home loan is to minimise how much you pay in interest and fees. By remortgaging, you can try to trim your monthly repayments down to size, and now is the right time to do it, as we explained in Remortgage now or regret it .

If you want personalised recommendations, try our Q&A tool, or get advice through either instant messaging (during office hours), email or by telephone through our unique mortgage service.

3. Bash your borrowing

On top of mortgages, we’ve also built up an impressive £231 billion in non-mortgage debt, such as credit and store cards, car and personal loans, and overdrafts. 

To avoid paying excessive rates of interest and sky-high fines for unauthorised borrowing, it makes sense to tidy up your existing borrowing. For example, by transferring your card debts to a credit card offering 0% balance transfers, you can freeze interest until as far ahead as January 2012.

4. Prune your premiums

Another good habit to adopt is to avoid automatically renewing your insurance policies. In other words, when your yearly renewal notice arrives, don’t just lazily accept your insurer’s latest premium hike. Instead, shop around in order to find quality quotes for car insurance, home insurance, life insurance and travel insurance. Your aim is to get the same or better cover for less cash and, thanks to the wonders of the Web, this is quicker and easier than it’s ever been.

5. Strengthen your savings

Once you’ve knocked your finances into reasonable shape, put some effort into boosting your savings. By earning more interest and avoiding tax on it, you can raise the returns from your spare cash. To get started, read Build up your savings.

 Lastly, by getting to grips with your day-to-day finances, you can limit the impact of any economic slump and, therefore, reduce your risk of ruin. What’s more, it should help you to sleep easier at night!

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