Five Steps to beating the recession!

Step 1 – Invest wisely

Top investors worldwide will tell you that you should never follow the crowd when investing. Indeed history has shown that when markets are in decline that has proved to be the time when you should be buying not selling. The view being that as long as you buy good quality stock backed with sound financial information and strong management then the funds you buy will be cheaper now than they are likely to be in the future. All too often the easiest time to encourage people to back equities is when there has been a prolonged rally in prices, logic tells us that you have already missed the boat and more dangerously you are also nearer to buying into an asset that is more likely to fall than to rise.
 

Step 2 – Lifestyle and spending habits

Look at your lifestyle and spending habits. If cash flow becomes restricted there are things which you will struggle to stop paying, mortgages, leases life insurance policies, motor insurances etc. However there are a number of ways you can reduce your outgoings when times get tough. Freeview television covers a much higher number of free to view digital channels now than ever before, Sky television subscription is one luxury you may want to consider stopping. If your mortgage payments are too high, talk to the lender consider going onto a longer repayment schedule, or if things are really bad go interest only for 6-12 months, you are not considered as going into arrears if you are able to meet the monthly interest payments, some mortgage companies allow you to have mortgage repayment holidays, examine all the avenues, but above all else keep paying the interest.
 

Step 3 – Pension Schemes

If you have a pension scheme and your scheme allows and you are over 50 years old you can apply to take the tax free cash from your pension. In most cases this can be up to as much as 25% of the total fund value (each case will need to be viewed on its own merits) you need to remember though that taking the tax free cash will reduce your pension entitlement at normal retirement date. If it’s a case of lose your home or lose your tax free cash entitlement then the answer is obvious. You do what you need to in order to protect your family and to keep your home.
 

Step 4 – Life Insurance Policies

Consider re-broking your life insurance policies, if you have policies which you have held for some time you may be surprised to see that the rates for life insurance have come down considerably. The reduction in smoking related deaths, the knee jerk reaction to projections of deaths caused by HIV infection meant that policies taken out 10 -15 years ago were very heavily loaded to account for the unknown risk that AIDS posed. You need to review your costs and needs analysis for this type of cover about every 2-3 years as rates are changing an your need for cover may diminish as you get older causing you to pay too much for the cover or indeed you may be paying for cover you simply don’t need.
 

Step 5 – Build your wealth portfolio