How to beat recession

27 December 2008

As everybody is talking about recession, we are getting more apprehensive about the future. The Daily Telegraph has published 10 tips on "how to recession-proof your finances and protect your home, pension and savings."
1. Insure your income
There are government plans to help homeowners who lose their jobs, but it will not be a solution for everybody as it will only pay interest on mortgages of up to £175,000 and only from week 13 after redundancy. Also this will only be applicable from April 2009 and will not help anyone losing their job now. There are few companies on the market, which can ensure your income. They normally will pay for up to 60% of your income normally for a period of 12 months. Some accident, sickness and unemployment policies will pay for up to 24 months.
2. Pick a winning card
Pay off as much debt as possible. Previously most credit card companies had 56 days interest-free periods, but many of them are now reducing this period to 50 days and are raising their prices. You still will be able to switch to a cheaper card, like Tesco or Barclaycard.
3. Switch to a tracker mortgage
As many experts believe that interest rates will continue to go down, it is a good idea to have a tracker mortgage which tracks the Bank of England Rate as each time they cut rate, your monthly payments will be lower.
4. Protect your savings
You need to know that if interest rates will go down, so return on your savings will be lower. There are good fixed rates available now, so it will be a good idea to lock into one of them now.
5. Take control of your pension.
If your pension is linked to a stock market, you may feel very nervous. If you are under 50, markets should recover in time for your retirement, but if you are close to 50, you should speak to your pension's manager. It is a good idea to speak to your advisor about your options.
6. Fix your retirement income.
It could make sense to buy an annuity soon, which will guaranty a fixed pension through your retirement. During the last year annuity rates were quite high, but expected to go down again as interest rates continue to fall.
7. Keep an eye on your final salary pension.
If you are expecting a pension from a company, which you suspect will not survive the recession, and then you may consider transferring out.
8. Shake up your share portfolio
As interest rates are on the way down, you may reshuffle your portfolio and invest in supermarkets and utility companies, which are expected to do well.
9. Cut the cost of essential insurance
Don't accept renewals for motor or household insurance. Shop around and tell your provider, that you are not happy with the renewal proposal, as they normally can reduce the price.
10. Boost your income.