Is an Australian recession dead ahead? Will the property market collapse? Families with a mortgage are getting crunched… what do we do?
An Australian recession we have to have?
I’m not going to lie.
The Australian share market is rampaging higher. But the economic outlook is pretty bleak.
Talks of an Australian, US and even a Chinese recession are being tossed around.
Mortgage repayments are way up.
Doomsayers predicting propadee-apocalypse are on the loose.
It all sounds pretty scary. And it is…
(Note: when fear is in the streets, I’m also convinced it can be a fantastic buying opportunity for people smart with their money.)
If you’re a little worried or just want to know how to batten down the hatches and protect yourself — no matter the weather, here are four financial rules I live by:
1. Lock down your career by investing in yourself.
A lot of news outlets (even Rask’s!) are showing data that ‘switching jobs is the easiest way to get a pay rise.’ That may be true in theory — but it also means you’re starting in a new gig you might hate and most likely you’ll be on a probation period (hello, one week’s notice!).
Plus, the last-in-first-out rule often applies (in finance, we called it LIFO). For the rest of 2023, bunker down and make yourself valuable but also have a Plan B by investing in yourself.
2. Keep your emergency fund for… emergencies!
3-6 months’ worth of living expenses set aside in cash is a minimum.
If you’re a one-income family. A contractor. A tradie. Or a would-be retiree — strive for more. Much more. How much? Enough that you don’t question it.
This cash should be kept in your offset account with your bank or in a high-interest savings account (like one provided by ING, Macquarie, etc.).
This money is not for investing. Or for spending.
(Note: As someone who’s in the market for a boat, I can tell you the prices for second-hand things seem to be coming down. This could be a sign people are getting rid of unnecessary items to boost their cash balances, which is a great idea… and not just because I’m looking for a good condition Stabicraft…)
3. Speak to your mortgage broker or landlord.
Everyone knows my trusted mortgage broker is Chris Bates and the team at Blusk. Your broker should already have searched for, and negotiated, a better rate.
If they haven’t. Shop around for a new broker while you’re at it.
Chances are, your mortgage, like mine, went up by more than $1,000 per month (mine has gone up nearly double that!). And I can tell you what, I haven’t got a $2,000 pay rise!
When my broker did my search (without me asking), they determined the most competitive rate they could get was with my current bank and proved it with multiple offers from other banks. No refinancing, no hassles. Just a better rate.
Shop. Around.
If you’re a renter, it’s a pickle. While the rental crisis could be about to become a mortgage crisis, the good news is that *if* official interest rates stop going up, it *might* ease the pain next year. Be strategic and consider speaking to your landlord about longer-term agreements (good for them; certainty for you).
(And for a moment, let’s not blame the RBA: look to our last 10 years’ worth of gutless politicians who knew a housing shortage was coming but didn’t do anything about it… except fuel it with more home-buying incentives and increasing red tape by local councils… which just put up prices!)
4. Invest!
I know. This one might sound crazy given everything I just said.
But if you have followed steps 1-3 and ‘got your financial house’ in order (i.e. you’ve paid down debts, built a cash buffer, can manage your mortgage/rent, got a good salary, and have got experts on your side), the next 6-12 months could be an incredible time to invest.
In what?
In whatever you think is right for you!
At any time, I like to keep my diversified portfolio simple (made mostly of ETFs and some stocks). But I want to be in a position to consider anything that aligns with my goals (ASX shares, US shares, LICs, property, a farm 🚜… even bonds or another business!).
Dollar-cost averaging, which simply means to automate your investing every week, month or [insert number], is about adding to your long-term wealth — rain, hail, or potential recession.
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For most of us, it’s a pretty easy four-point plan to follow. But if you’re confused, get expert advice from your financial adviser, accountant or mortgage broker.
Remember, there are so many good things you can do, to make money, that don’t cost money.
(Like checking on your lost Super, finding unclaimed money, educating yourself, up-skilling via government-supported courses, getting on top of your behaviour…)
If you’re stuck, subscribe to one or more Rask podcasts — across our four podcasts we release at least one fun but expert-driven episode every day, often with Australia’s best experts, completely free. Over 150,000 Aussies already tune in! Click here to check them out and snatch back your financial confidence once and for all.
