I hate doom and gloom for the sake of it. Trust me. I hate it as much as the next person but let’s face up to reality, we’ve had 12 months straight of interest rate hikes. It’s like tapping on a cocktail glass with a knife. At some point, it’s gonna shatter.

Now, we could have a scenario where too many things don’t break too hard (or “soft landing” as it’s so-called). Basically, the damage is not too bad and more importantly, it’s pretty simple to piece it all back together. But imagine a crystal glass shattering – man, something tells me putting that together again is a lot harder than Humpty Dumpty. 

But whatever happens, economic storm or otherwise, here are 3 simple things you can do to make sure your finances are as rock-solid as they can possibly be. The better prepared you are, the better your chances of making it to the other side with minimal damage!

#1 Build up your rainy-day fund, pronto

When it comes to rainy-day funds, the rule of thumb goes like this: have anywhere between 3-12 months worth of expenses. In cash. So if you spend £3,000 p/m (this includes everything from your mortgage payments to your milk) this means at minimum you need to have £9,000 stashed away that you don’t touch. But if you wanna be bullet-proof, I’d say try to build up 12 months worth of expenses. 

This isn’t money that you use when you’re feeling in the mood for a last-minute vacay (though if you are: here’s 5 ways how to keep the costs down!) or if you fancy a new bedroom, nah. This money is for those money emergencies. Like having your boiler suddenly break down (these these cost a few grand btw!) or worse, losing your job. 

When it comes to job losses, these go hand-in-hand with a recession. I’ve seen a lot of stuff written about the concept of ‘full employment recession’ – this is utter baloney in my opinion. Recession without job loss ain’t no recession. Psst: here’s how to make sure your finances are bullet-proof so you can survive a layoff.

When the economy contracts, businesses start slowing down and since consumers will not be spending like they once did, they don’t need as many workers around. Plus, when revenues fall, cutting costs is usually the first thing that they try to do. And the highest costs are wages. So workers get shown the door. 

When it comes to job losses, we always think they’ll happen to others, and not us. We think our jobs are rock-solid. But nothing lasts forever and workers are not permanent (let alone ‘family’, lol). Don’t believe what your employer, or anyone else tells you, your job can be snatched away in the blink of an eye.

A relative of mine worked for Meryll Lynch in the early 2000s. Then came ‘08 and his biz went bust. He was shown the door, escorted by 2 security guards as though he was some sort of criminal. He packed up his stuff, or whatever was able to fit into a cardboard box and that was that. He never really recovered from the shock if I’m honest with you.

So think of your rainy-day fund as your get-out-of-jail-free card. It’ll save you from whatever financial pickle you’re stuck in. If you lose your job in a recession when everyone else is busy shedding workers like skin, you’re gonna have a hard time landing one in the blink of an eye.

But guess what? You’re still gonna have to pay your bills (like your mortgage). Job or no job, your bills don’t really care. So having that cash buffer will mean you won’t land yourself in trouble because you can’t pay your bills while you look for another job. It will give you that breathing space. 

So start building up that cash pile. And stash it in a high-yield savings account so you can at least earn some interest on it but you gotta make sure that it’s instant-access. Otherwise, it’ll be a little bit useless. 

#2 Don’t spend above your means 

One of the greatest things you can do for your finances (and overall sanity) is by living above your means. It means not getting more expensive cars (as someone who wishes they had a car, from insurance to the model itself, it’s all gone through the roof) and it means renting a less-than-fancy place with a smaller sq ft.

Remember, smaller place = smaller bills. Why bother wasting most of your pay-check on a 2-bed when a 1-bed will suffice, or even a studio! Loads more people from Gen Zers to Millennials are moving back in with their folks. And they aren’t just doing that to have Mum’s good food! They’re saving on the biggest bill of all: rent. Yuck.  

All of this means your fixed bills (the ugly stuff you cannot escape from) will be kept to a bare minimum. So that if something nasty does crop up your finances will be in a much stronger place to handle. Psst: here’s why big bankers are struggling with their even-bigger homes and how it pays to always plan for the worst!

Having smaller fixed bills means you’ll have thing one golden thing: cash flow. Don’t laugh but being rich (aka having lots of assets) doesn’t magically mean you’ve got oodles to spend each month. Nah. Your money is most likely tied up in those very assets. In houses, stocks, you name it.

My family friend never has any cash on him since they’re too busy investing. Right down to the very last penny. This means when disaster strikes, they need to use credict cards. Sure, while they’ve technically got access to like £30k on their Amex, they need to pay it back the next month. That breathing room is worth tons, sure.

But for most of us, we a) don’t have access to that much credit and b) won’t have stuff to dispose of to get that money. But also, who want to be a forced seller?! Here’s the damage higher rates are causing to anyone living above their means.

The best time to change your habits is while you still can, not when you’re forced to. When people lose their jobs, houses get repossessed and stocks fall, it’s too late to really do anything. So put in the effort and make the hard choices now so you don’t get forced to make the harder choices later. 

#3 Prepare for the worst and don’t run when it comes 

When stock markets fall, we all get so freaked out since it feels like we’re flushing our money down the loo. But if you wanna totally wipe away that feeling (ha-ha) then you gotta be prepared. See, if you know stocks will fall (and they will, at some point) then you’ll know what’s coming and it won’t catch you so off-guard. The problem with lows in the market is we don’t see them coming.  

We think stocks go up in a linear way. And they don’t. Of course the general trend is up, otherwise we’d have given up by now, but down periods are part of the game. So might as well not fight it. If you see stocks falling, think of it as the biggest and best clearance sale. It’s like your fave clothing store has got 80% off.

Do you run and say ‘I’ll buy them when they’re full price again, thanks’. NO! Obviously. But we don’t see stocks like that. We feel better buying them when they’re back at their full price than when they’re sitting at the clearance rack. Change your mindset = change your wealth. Seriously. 

Stocks will probably fall later this year. When, and by how much, your guess is as good as mine! They can’t not fall. US stocks (or shall I say a select few) are bursting at the seams. Their price tags are so massive, they’ve pretty much gotta be A+ forever. Obvs, that’s a wee bit hard. But read here if stocks the biggest scam now that investors can earn 5% risk-free?

But anyway, when you factor in the 12 months straight of rate hikes we’ve been shoved and all the other wobbly bits of the economy (cough, cough commercial real estate) it feels like something is gonna crack, if not break sooner or later. But you wanna be prepared for that. 

Whether that’s having some cash on hand or chucking your money into stocks each month (whether you feel like it or not) making sure you don’t miss out on discounted prices. Because you’ll kick yourself when the tide turns. Again. So don’t fight the fed, don’t time the market and just keep buying. These 3 words will save you. 

It’s all about managing expectations. If you’re ready for something, it won’t freak you out nearly as much as if you never saw it coming. 

Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.