Irish financial expert Eddie Hobbs has predicted a recession will hit by autumn 2022, as cost of living continues to rise and mortgage interest rates set to increase in July.
Hobbs says 'all the signs are there' for a financial crisis to hit Ireland this year.
In an interview with the Irish Mirror, Hobbs said: “We will likely be in recession by early Autumn, but definitely by Winter. All the signs are there. Right now, we are in a vortex, on the way to recession. We’re looking at the economy contracting, job losses, business closures. It’s a f**king firestorm.”
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He added: “The next financial crisis is upon us, except this time, it’s in the guise of the runaway cost of living. The price will be paid by the working people getting poorer."
But what should people do to prepare for the months, or possibly years, ahead?
Dublin Live spoke to economic expert Carol Brick of Hermoney.ie on how to prepare yourself for a downturn. Here is the advice she has on how to manage your money ahead of a recession.
Follow the 50-30-20 budget rule
"I strongly believe in the 50-30-20 budget rule which is a percentage-based budget concept which emerged in the late 90s. It is a very popular budgeting style and is extremely simple and flexible and can be applied to any stage of life," says Carol.
"It is based on percentages and can be completely adapted to your own circumstances."
"So, the way it works is that 50% of your earnings are spent on “needs” which are loosely defined as necessary costs for you to live, like a roof over your head, food, electricity, loan repayments etc."
"30% is spent on discretionary items so all those things that we enjoy but, let’s face it, we could do without if we had to. Things like entertainment and social outings would fall into this category."
"Finally, 20% would go towards your financial goals and these depend on what is a priority for you and your life. This may be eliminating debt, saving for something special, unexpected expenses or for the long term."
Prioritise paying off debts with high interest rates
"If you are wondering which debts to pay off first, the answer is simple – whichever has the highest interest rate," Carol said.
"Some of our clients make the mistake of perhaps prioritising the “biggest” over the more “expensive” of their loans.
"All things being equal, more expensive debt should be repaid before less expensive debt so the running order would usually go as follows - credit card, personal/student loan, car loan and finally mortgage because this has the lowest rate so obviously the least expensive.
"So, keep making the minimum repayments on all of your lower-rate debts such as your mortgage and try and devote the maximum amount of money to higher-rate debts such as your credit card until this is cleared and then address the next most expensive debt on your list until you are hopefully finally debt free."
Rank your expenses in order of priority
"My overall advice would be to review all of expenses in detail and then rank them in order of importance," says Carol.
Here are the following questions you need to ask yourself:
Can any of your current expenses be reduced or even eliminated?
Are you getting the best rates possible on utility, insurance, and mortgage costs? If unsure, seek advice.
Are there subscriptions or memberships that you do not use that could be cancelled?
Are you doing everything possible at home to save on energy costs like turning off lights and appliances when they are not needed?
Could you buy some of your groceries in bulk or from a discount supermarket to reduce costs?
Could you cook more meals at home to save on takeaways and eating out?
Lots of small tweaks to your expenses really do add up and can make a huge difference to your overall outgoings which will greatly help to reduce any financial pressure.
Basic investing rules to follow
"Over my 25 years as a Financial Advisor, I have found that whether it is a period of sustained volatility due to a global financial crisis, a medical pandemic, or a recession, the basic principles of investing still hold true and go as follows":
Set long-term investment goals
Keep investing (if you can)
Never try and time the market
Spread your risk through diversification
Do not panic!
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