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Five ways to help safeguard your finances through economic uncertainty

Here's some strategies to help protect your finances if the economy takes a turn for the worse.

Australia's economy is often impacted by local and international events, and there's been many unexpected political and economic hiccups over the previous few years. For example, both Brexit and the US presidential election in 2016 had a negative impact on the Australian economy.

Five strategies to safeguard your finances

Australia has been lucky enough to avoid a recession for many years, however it's still a good idea to put some strategies in place to make sure you're protected just in case things take a turn for the worse. Here's five things you can do to get started.

  • Manage your mortgage

Due to the role that the property market will play in an economic downturn, you should try to control the risk associated with your home loan and reduce your mortgage debt strategically. You may want to increase your repayments and fix a portion of your variable rate loan. You may even want to consider refinancing if you can find a better lender.

  • Increase your savings and build up your buffer

It's always a good idea to increase your savings and strengthen your emergency fund, but it's particularly important during times of economic uncertainty. Cut back on your spending and put the surplus into an emergency fund. Having an emergency fund never hurts, even if a recession doesn’t end up occurring. You can determine the appropriate size of your safety cushion by asking yourself how many months you would need to last without an income if you were to lose your job. This may be affected by the nature of your career and how confident you would be in job hunting.

If you struggle with saving, you should treat putting money aside as a priority expense. When you receive your salary, try to deposit 30% of it (or whatever percentage you decide on) into your savings account before paying off your other expenses. Of course, you will have to decrease your non-essential expenses in order to make this savings commitment. You will be surprised at how much of an impact you can make just by saving a fraction of every pay cheque. Put these savings into a high-interest savings account or even a term deposit and let compound interest do all the hard work.

High interest savings account offer

UBank USaver

2.41 % p.a.

max rate

1.35 % p.a.

standard variable rate

High interest savings account offer

Ongoing, variable 2.41% p.a. when you link your USaver account to a UBank Ultra transaction account and transfer at least $200 per month into either account. The linked transaction account has no monthly fees and no international fees. Bonus interest available on balances up to $200,000.

  • Maximum Rate: 2.41% p.a.
  • Standard Variable Rate: 1.35% p.a.
  • Monthly deposit required: $200.00
  • Monthly fees: $0.00
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Rates last updated September 21st, 2019
$
$
months
Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Interest Earned Product Description
UBank USaver
2019 Winner
UBank USaver
2.41%
1.35%
1.06%
$0
$0 / $0
Ongoing, variable 2.41% p.a. when you link your USaver account to a UBank Ultra transaction account and transfer at least $200 per month into either account. The linked transaction account has no monthly fees and no international fees. Bonus interest available on balances up to $200,000.
Rabobank Online Savings High Interest Savings Account
2.75%
1.30%
1.45%
$0
$0 / $0
Maximum variable rate of 2.75% p.a. for 4 months, reverting to a rate of 1.30% p.a. No deposit or withdrawal conditions. Available on balances below $250,000
AMP Saver Account
2.61%
1.65%
0.96%
$0
$0 / $0
Introductory rate of 2.61% p.a. for 4 months, reverting to a rate of 1.65% p.a. The bonus rate offer is for new AMP Saver customers only, and applies to the first $250,000 deposited.
ME Online Savings Account
2.35%
0.80%
1.55%
$0
$0 / $0
Ongoing, variable 2.35% p.a. rate when you link to a ME Everyday Transaction account and have at least one purchase with your Debit Mastercard using tap & go processed each week. Available on balances up to $250,000.
HSBC Flexi Saver Account
2.15%
0.65%
1.50%
$0
$0 / $0
Ongoing, variable 2.15% p.a. when you grow your balance by $300+ per month. Earn bonus interest even if you make withdrawals during the month. Available on balances up to $5,000,000.
Suncorp Growth Saver Account
2.05%
0.20%
1.85%
$0
$0 / $0
Ongoing, variable 2.05% p.a. when you grow your balance by at least $200 (excluding interest) and make no more than one withdrawal in the month. Available on the entire balance.
Bankwest Hero Saver
2.10%
0.01%
2.09%
$0
$0 / $0
Ongoing, variable 2.10% p.a. rate when you deposit at least $200 each month and make no withdrawals. Available on balances up to $250,000.
MyState Bank Bonus Saver Account
2.50%
0.80%
1.70%
$0
$0 / $0
Ongoing, variable 2.50% p.a. when you deposit at least $20 into the account each month and make five or more Visa Debit card transactions from a linked MyState transaction account.

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  • Lower your level of debt

Going into an economic downturn with an unsustainable level of debt is a sure-fire recipe for disaster. Now is the perfect time to re-evaluate your borrowing and work towards paying off your debts. Consider paying off your credit cards or even cancelling them all together, transferring your loans to a more favourable provider, implementing a viable budget and downgrading your car to decrease repayments. Remember, if you’re questioning whether you can afford a line of credit, the chances are that you can’t. Start managing your debt early and get ahead of the game.

  • Minimise risk and maximise liquidity

For many people, a recession could have a devastating impact on our investments. If you have not already done so, you should consider diversifying your investment portfolio. The more diversified your portfolio is, the better placed you are to handle a dip in the market. It's the classic saying, "don't leave all your eggs in the one basket." You can check if your portfolio is diversified taking a look at these five signs.

Invest in different companies across different industries, divert your funds away from high-risk companies and focus on blue chip stocks. You should also consider defensive or non-cyclical stocks. These are stocks that are not highly dependent on the state of the economy and can still make a profit during an economic downturn such as food or water. This also means assessing any investments you have with businesses whose earnings are negatively impacted by the state of the economy, such as discount and online retailers. It’s also an excellent idea to diversify into international shares and securities, as well as different asset classes like property. And if you haven't yet started investing in shares, it could be a good time to do so.

Compare share trading platforms

Updated September 21st, 2019
Name Product Monthly fee Standard Brokerage Fee Margin trading - Online
$0
$8.00 or 0.1%
Yes
Special offer: Earn up to 10,000 Qantas Points when you start trading on a new IG Share Trading account. T&C applies.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, forex and CFDs, plus get access to 24-hour customer support.
$0
$6.99 or 0.1%
Yes
High quality, low-cost brokerage on global share trading.
Access up to 19,000 global stocks on 36 of the world’s major stock exchanges and enjoy some of the most competitive FX rates on the the market when you trade with Saxo Capital Markets.
$0
$9.50
No
Trade ASX-listed shares for a flat fee of $9.50, regardless of the trade size. New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
$0
$15 for first 10 trades
Yes
Offer: For a limited time, get a custom deal based on your trading preferences when you switch to Bell Direct.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
$0
$11 or 0.1% for first 10 trades (for trade value up to $11,000)
Yes
Access a broad range of investment products from Australia and overseas.
Take advantage of IPOs and trade shares, warrants, options and CFDs listed across the ASX, SSX and Chi-X, and other major global exchanges, including US, Canada and UK markets.

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  • Invest in yourself

Lastly, it may be worthwhile to consider how your current job may be affected by an economic downturn. Are your skills easily replaceable, or can your role be outsourced for a lot less money? If you answered yes, consider updating your skills and taking additional career development courses to safeguard yourself from financial uncertainty. Investing in yourself may be better than investing in any other asset, as it will increase your earning potential for years to come.

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