How To Financially Prepare Yourself For A Recession

What does a recession mean for you, and how can you prepare?

Posted June 2023

We’re all feeling the pinch of rising inflation.

From the supermarket to the gas pump, everyday costs increase month by month. Many Kiwis are doing it tough right now, and economists predict it will get even tougher. Here we share some ideas for our Unity Community to consider how you could prepare. From reviewing your home loan structure, strengthening your savings or even investing in a term deposit read below to find out more.

• What can you do to financially prepare for a recession?
• Lock in an interest rate on your home loan
• Limit large purchases
• Strengthen your savings
• Open a Term Deposit
• Pay off high-interest debt

What can you do to financially prepare for a recession?

The verdict is in. Recession is on the cards. We want our members to be financially prepared for the inevitable. Preparing now will minimise the impact of this challenging economic period. Here’s what you can do.

Lock in an interest rate on your home loan

If you have a home loan, interest rates are always a hot topic. We’ve enjoyed low interest rates for some time now, but this is changing. Interest rates are already as high as 6%. Some economists are predicting a grim 8%.

The problem is many Kiwis purchased a home at an interest rate as low as 2%. An increase to 8% will cause significant financial hardship.

Speak to Unity about locking in an interest rate for a longer term. This way, you’ll know what your repayments will be for the foreseeable future.

If you have part of your home loan on a floating rate and it’s becoming too expensive, consider fixing it along with the rest of your loan. At Unity, we offer competitive fixed home loan rates for up to 24 months. 

Limit large purchases

Reducing spending is a great way to prepare for a recession. However, right now, a quick trip to the supermarket costs significantly more than it did this time last year. These are the things we can’t do without.

But we can delay big-ticket purchases. It doesn’t mean you can’t get the shiny new car eventually. It just means you might need to wait until the economy gets back on its feet.

Strengthen your savings

Now is the time to put some money aside. We understand that this may be easier said than done, especially with inflation so high. However, a little extra savings every week will go a long way in strengthening your financial situation.

You can bolster your savings by reducing spending. If you have any unused subscriptions or memberships, consider cancelling them and saving the money instead. Remember, a little goes a long way. Start now, and you’ll have a strong backup plan when the recession hits.

Open a Term Deposit

Savings accounts are great. Term deposits are even better. One good thing to come out of higher Official Cash Rates (OCR) is the increase in interest earned on savings.

There’s never been a better time to open a term deposit with Unity.

Our competitive term deposit interest rates will grow your savings for your chosen investment period. With fixed periods ranging from one month to 60 months, you can have your term deposit as little or as long as you like. Opening a term deposit with Unity is easy. Simply choose your investment period and apply online. 

Pay off high-interest debt

High-interest debt will be a thorn in the side of many Kiwis in 2023. Do you have credit card debt or a high-interest loan hanging over your head? Now is the time to look into clearing it.

Again, this is easier said than done. Debt is easy to get into and hard to get out of. However, we’re here to help our members out of the red. We offer our members debt consolidation loans that combine all your debts into one easy-to-pay loan. Our debt consolidation loans can help you. 

Recession is looming, but there's time to prepare.

We know a recession is likely. The news isn’t great, but we’re fortunate to have the warning many months in advance.

Do what you can to improve your situation, as strong finances will make for an easier ride. We want to ensure our members are in a good financial position to weather the economic storm. Don’t hesitate to call our friendly team for more advice on how to prepare. We’ll get through this together.