Survival tips: Escape the credit crunch
Job losses, tax cuts and pay reductions mean that household budgets are being squeezed like never before. Charlie Weston suggests some top 'survival tips'
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 this year.
We are still in the midst of one of the sharpest falls in economic growth experienced by any Western economy since the Great Depression.
Add into the mix job losses, tax cuts, pay reductions and you end up with a household budget squeeze that is pushing many families to the edge, financially speaking.
Here we outline some strategies and tips for surviving the ongoing recession.
Start an emergency fund
Put money aside as an emergency fund -- a pot of money that is readily available at short notice to meet unexpected expenditure such as 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.
Irish Nationwide has a regular savings account that pays 4.35pc. You can put in a minimum of €100 a month, and a maximum of €1,000 (€2,000 for a joint account).
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 left when you need one.
Cut the grocery bill
Grocery shopping is another 'budget buster' for many families, especially if you have a house full of teenage boys with big appetites.
One easy way to cut down on the 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 over what 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 give room for a few extras that you may have forgotten to add to your shopping list.
Protect your job
In a recession, the number one priority for most people will be keeping their job.
To ensure this may mean putting in a few extra hours, working a little harder, and improving your skill set.
Those that 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 12pc.
Bring 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 in 2010, according to financial adviser Bob Quinn of www.myrecession.ie.
Watch those bank
Going overdrawn on an unauthorised overdraft every month will cost €5.15 per item with AIB. To set up an authorised overdraft with AIB will cost €25.39 initially, with this charge recurring every year.
Switch your current account to Halifax and benefit from zero overdraft set-up fees, Mr Quinn advises.
For those of you with money in your current account regularly, make sure you're getting paid interest on it. Call your bank now to inquire about this.
It usually involves simply filling out a very straight-forward form, he added.