When a recession hits, it can be difficult to understand what it means for you.

If you’re struggling to identify the areas where you can help your financial situation during a recession, look no further.

Kevin Mountford, co-founder of savings platform Raisin UK, has shared some tips for those who are unsure what to do during a recession.

Kevin said: “As the UK enters a recession, it's important to understand what this economic term signifies and how it impacts individuals and businesses alike.

@uktoday_ Here’s the UK Recession explained #ukrecession #recession2024 #gdp #uknews #uknewsheadlines ♬ original sound - UKToday 🇬🇧 Newsquest

“A recession is typically characterised by a significant decline in economic activity across sectors, resulting in lower employment rates, reduced consumer spending, and diminished business investment. This downturn often lasts for several months to years, affecting various aspects of daily life.

“For individuals, a recession can translate into job losses, wage cuts, or increased financial insecurity. It underscores the importance of prudent financial management, such as budgeting, saving, and debt reduction, to weather economic uncertainties.

“It may also prompt individuals to reassess their career paths, upskill or reskill to remain competitive in the job market, and explore alternative sources of income.”

6 tips to help you with your finances during a recession

Kevin Mountford, co-founder of savings platform Raisin UK, has shared six tips to help you with your finances during a recession.

Budgeting

Take a look at your finances and create a budget to make sure you’re living within your means. Cut down the expenses that are non-essential and prioritise essential ones.

Tips for first-time buyers

Emergency fund

If you haven’t already started an emergency fund, Kevin says it’s good to have one.

During uncertain times, having savings equivalent to at least three to six months' worth of expenses can provide a safety net.

Debt management

If you have debts, try to pay them off strategically. Kevin encourages you to prioritise high-interest debts first and consider renegotiating terms with creditors if necessary.

Diversify income

Explore opportunities to diversify your income streams such as freelancing, part-time work, or starting a side business as multiple income sources can help mitigate financial risks.

Recommended reading:

Upskilling

Invest in developing new skills or furthering your education to stay competitive in the job market. Look for training programs or courses that align with in-demand industries.

Government support

Kevin advises that you stay informed about government support schemes available during a recession such as unemployment benefits, tax credits, or business grants. He encourages those who are eligible to take advantage of these resources.

Kevin adds: “Remember that recessions are temporary, and taking proactive steps to manage your finances and career can position you for long-term success despite the economic challenges.”