The global stock market is experiencing turbulent times. The surging oil price is unsettling the markets as investors fear the economic impact.
A growing number of analysts are warning that a global recession could be looming and that the economy could be heading for a downturn the likes of which have not been seen since the Great Depression of the 1930s.
Here are tips to help to help cope with the worst, if it comes:
Concentrate on repaying secured debts first
If struggling to keep up with bills and debt repayments, the priority has to be to meet the repayments on secured debts first, or risk property repossession.
Repay more off credit cards
Paying just £10 over the minimum repayment amount each month could halve the time it takes to pay off the balance of a credit card and slash the interest payable.
Repayments can also be reduced by moving credit debt to another card using a 0% balance transfer deal.
Build up a savings buffer
Saving regularly is a great habit to get into as it affords some protection. Financial advisers suggest the equivalent of three to six months’ salary saved. The amount needed obviously depends on outgoings.
One of the positives of the credit crunch has been that banks are offering some great savings deals in order to attract money to plug the gap caused by liquidity shortages on the wholesale markets.
Cash is best
Volatile stock markets are likely to lead to increased demand for cash-based products as investors turn their backs on equities and seek a safer home for their money. An effective move is to make use of the individual savings account allowance (ISA) as interest returns are tax-free. £3,600 a year can now be invested into a cash ISA.
If additional cash is available, the leading fixed rate bonds are paying an impressive rate of interest over a 12 month investment term.
Overpay the mortgage
If in a position to overpay the mortgage - even if only by a modest amount - then do so. It could save thousands of pounds in interest and significantly reduce the mortgage repayment term. Most lenders allow overpayments but it is worth checking as not all do – and some have early payment redemption penalties.
Run a credit rating check
With the advent of the credit crunch banks and building societies are becoming much more cautious about lending money. They are looking for low-risk customers with a good track record of debt repayment. It is therefore crucial to ensure there are no mistakes or inaccuracies in your credit file.
Your credit score affects your chances of getting a mortgage, loan or credit card. It also influences the rate offered. You can obtain a copy of your credit histories from agencies such as Experian for as little as £2. Check for any irregularities and if your credit score is not particularly good, look to see if there is any way you can improve it - closing old credit card accounts and setting up direct debits to ensure payments are made on time can have a positive impact on your score.
Get a fixed energy tariff
With the oil price continuing to rise, further increases in energy bills are expected, with consumers being warned that they could rise indefinitely. With this in mind, it could be a good time to fix your energy (gas and electricity) tariff to protect from further prices hikes.
Get insurance
It is worth considering payment protection insurance (PPI) and mortgage payment protection insurance (MPPI). They are designed to cover loan and mortgage repayments if you have are unable to work due to an accident or long term illness, or are made redundant.
Before applying for any product however, it is advisable to read the terms and conditions thoroughly, because there are common exclusions. PPI and MMPI policies tend not to cover the self-employed, students or housewives. In addition, illnesses such as stress and back pain are commonly excluded.
Moneysupermarket is currently the only comparison site comparing MPPI policies. It also compares prices of PPI.
Reduce outgoings
Take a long hard look at the household finances - is there anything that could cut back on? If £5.50 a day is spent on lunch, for example, you could save over £100 a month by taking in a packed lunch. You may also discover old direct debits or standing orders being paid out of your account for policies or subscriptions you no longer need or use.
Take the time to review your insurance products and shop around for cheaper deals. Look at your broadband package too and do not pay extra for a download allowance you will never use.
It is also worth reviewing how you shop. Searching the internet and using comparison sites will identify retailers offering the lowest prices for goods and services.
As well as reviewing everyday spending, it is also worth looking at other ways of reducing outgoings. For example, if you have a mobile phone contract, do you use all your free minutes and text allowance each month? If not then you are probably paying too much.