Cost of living: How people can get themselves financially ready for a recession

What can we do to prepare?

Shanks said it was important for people not to get scared and continue spending money where possible.

“In a recession, what you do see is… individuals stop spending, you see businesses stop investing, they stop borrowing, they cut back on expenses and that’s the effect of a recession, and we don’t want to force a recession by having those behaviors before it comes – if it was to come.”

While people shouldn’t panic, there were several measures people worried about a recession could take, Shanks said.

“Think a bit more about things likeā€¦ building up your emergency fund, paying down your debt, staying invested.

“You should be looking at ensuring that your income’s working for you – [for] many people, every day, every week, every month – money just seems to disappear and that’s their hard-earned income disappearing. So it’s about understanding what’s essential, what’s not essential, having a budget, having goals… and monitoring those to make sure you haven’t got money wasted.”

Financial journalist and podcaster Frances Cook said people should hope for the best but plan for the worst.

“It’s not a sure thing that we’ll end up in recession, but preparing your money is always a good thing,” she said. “Start by boosting your savings. Even an extra $20 a week into a savings account will get you $1000 in less than a year.”

Cook said savings prevent people from going into more debt should unexpected costs – like car breakdowns – appear.

Like Shanks, Cook also recommended paying down debt.

“Interest rates are going up, and likely to keep going up, which is making debt more expensive by the day. You don’t want to be stuck paying for what past you bought.”

Ayesha Scott, a senior finance lecturer at the Auckland University of Technology who recently launched an online toolkit to help Kiwis have healthy conversations about their money, said people should talk to those around them about how to prepare for any changing circumstances.

“With rising cost of living and budgets being squeezed, it’s an opportunity to figure out where you’re placed and have a chat to your partner/parent/child/flatmate about finances,” Dr Scott said.

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