Although South Africa escaped a technical recession after the economy grew by 0.1% according to data from Stats SA, it is essential that people prepare themselves and their finances, for the worst possible outcomes.
While South Africa is not in a recession, the prospect of it can put you under a lot of financial stress especially if you have expenses to pay and a family to take care of.
Here are five ways you can recession proof your finances.
Living within your means
By starting to live within your means you will be better equipped to face a rise in the cost of living as well as have money to save.
To start living within your means it is essential that you differentiate between your needs and wants.
This is according to Farzana Botha, the Communications Manager at Sanlam Risk and Savings, a need refers to something vital like your home or food for your family while a want is something nice to have like takeaway lunch at the office.
Have a clean credit record
Having a healthy credit score puts you in a better position when hard times hit like a recession and will help you in the future if you need to get credit. Keep your credit record on the right track by paying your creditors on time and avoiding late payments.
If your are struggling to make your payments, speak to your creditors about a temporary lower repayment amount or creating a payment plan that will suit your financial circumstances. Check with your bank or a credit bureau to get your free credit report.
Start an e
Tyrone Lowther, head of Budget Insurance said that it is recommended that you have at least three to six months of salary saved up in your emergency fund.
Having access to a financial buffer is crucial in a crisis is important because it means that you won’t be reliant on credit. If you are using money from your emergency fund, replenish it as soon as possible.
Saving and investing
According to African Bank, the main benefit of saving and investing is that it allows you to stay ahead of inflation as well as increase the value of your money. Do your research to find the best investment rates. Start small then build up your investment or savings.
Start your own side hustle
Having a side hustle gives you an extra income stream, which can be a buffer and a lifeline in a financial crisis. Turn your hobby or talent into a side hustle and make that extra cash. You can put the extra money that you have towards your savings fund or your emergency fund.
Financial literacy
Being financially literate can help you become money-savvy and make responsible decisions that can hep you in a financial crisis.
Rita Cool, a certified financial planner at Alexander Forbes said that to improve your financial literacy, you should make use of the resources that are available to you.
You can listen to trusted experts on podcasts, watch videos, read blogs, or consult with experts to expand their financial knowledge.
IOL Business