Stay bullish with our recession-savvy strategies for pulling your horns in
Ireland has experienced some of the sharpest falls in income in the Western world. Charlie Weston outlines money-saving tips to help survive the downturn.
Published 27/10/2011 | 05:00
WE may be over the worst of the recession but when it comes to money matters it is not going to be any easier for households, with another tough Budget on the way.
Households are seeing some of the sharpest falls in their income of any in the Western world in modern times.
Add into the mix job losses, tax changes and pay reductions and you end up with a household budget squeeze that is pushing many families to the edge financially.
Here we outline some strategies and tips for surviving the ongoing recession.
Start an emergency fund
If you can, put money aside as an emergency fund, a pot of money that is readily available at short notice to meet unexpected expenditure -- for example, redundancy.
It is normally recommended that an emergency fund be at least three to six times a person's monthly net earned income -- in other words, at least three times monthly after-tax income.
If you are in a stable relationship and have two incomes, then a three-month reserve should be sufficient.
Put your spare money in the highest paying savings account you can find.
Cash not credit
The best way to cut down on spending is to pay cash.
If you actually see the money leaving your hand, you tend to think harder about purchases and, in the end, spend less. When you use credit cards, it doesn't always feel like "real money". Cash does.
Have credit options
Another tip is to negotiate a line of credit with your bank, or preferably your credit union, while your finances are still strong.
Everyone should have a credit union account. Credit unions are in a completely different position to the banks -- they have money to loan out.
If something happens to your job, a personal line of credit or overdraft facility can be the safety net you need.
In other words, buy your umbrella before it starts to rain. If you don't, there may not be any options left when you need one.
Cut the grocery bill
Grocery shopping is another budget buster for many families, especially if you have teenage boys with big appetites.
One easy way to cut down on unnecessary grocery spending is by eating before heading out to do the shopping.
Studies have shown that shopping on an empty stomach results in shoppers spending 50pc more than they had planned to spend, because they start seeing junk foods that they want to eat as soon as they get home.
Make your list, and plan your budget accordingly to allow room for a few extras that you may have forgotten to add to your list.
Protect your job
In a recession, the number one priority for most people will be keeping their job.
This may mean putting in a few extra hours, working a little harder, and improving your skill set.
Those who stay employed during a recession generally weather the storm pretty well, experts say.
It goes without saying, but the last thing you want is to be looking for a job with the unemployment rate above 14pc.
Take your lunch to work
It costs €2 to make a sandwich, whereas it costs on average €6 to buy it in the local deli.
Butter your own bread and you will save over €900 a year, according to financial adviser Bob Quinn of www.myrecession.ie.
Boost your income
Pay cuts in the private and public sectors and massively increased taxes have put pressure on the household budgets of almost all. Increasing your income is one way to deal with that.
Ways to boost your income include renting out a room in your house. You can earn €10,000 a year tax-free from renting out a space in your home.
Another option is to sell unwanted items on eBay and Amazon and earn extra money.
Alternatively, couples can child mind. You can mind up to three children and as long as you earn no more than €15,000 a year you are not liable for any tax.
Take a second job, if you can find one. The advantage of working unsocial hours or nights is that they tend to pay more. Check in your local pub to see if they need extra bar staff. Tips usually make up for a lower wage.
Buy a more economical car
You could save yourself almost €900 a year by driving a more economical car, according to Mr Quinn.
The savings could pay for your road tax and insurance.
Or, you could always take the bus.
Join a car pool
You could cut driving costs in half by car pooling or car sharing with just one other person.
To find out about any car pools/shares near you, log on to www.dublintraffic.ie or swift commute.ie.
Irish Independent Supplement