Last updated at 15:09, Wednesday, 13 June 2012

TV money guru Martin Lewis, above, runs the consumer revenge website MoneySavingExpert.com – and each week in House & Home he’ll be bringing you his latest money-saving tips

Martin Lewis

IS it time to recession-proof your finances? The economy is shrinking and a panic wave of worry has swept across the nation. Yet, before we all go battening down the hatches, risking making things worse, it is worth taking a moment to actually think about what recession really means for our pockets.

The technical definition of recession is that the economy has shrunk for two quarters in succession – in other words, six months. Therefore it is important to understand being in recession is a reflection of what has already happened, rather than a prediction of what will happen.

The announcement that we are now in a recession hasn’t actually changed anything: the bad causes are in the past, not the present.

In previous recessions the announcement has been a precursor to an economic nosedive, but the graphs are slightly different this time. We’ve been flatlining for years, and the falls over the last six months are fractions of a percentage, a slight worsening of an already poor economy.

So it’s likely that, rather than any huge deterioration, this is a case of ‘more of the same’. Though, with the economy, of course, anything could happen.

Therefore, far more important than the wider economy are your own personal circumstances. If you have a stable job in a strong company, little has changed. If redundancy looms, preparation is crucial. If you are on benefits or unemployed, it is about continuing the struggle.

Recently I gave you my top tips for a range of circumstances, here’s another five:

1. Use credit cards to ensure big purchases are safe.

Sadly, firms go bust in recessions. If that happens and ordered goods haven’t arrived, or have but are faulty, it’s a nightmare. However, Section 75 laws mean that if you use a credit card (not debit card, cheque or cash) to pay even partly for something costing between £100 and £30,000, the card company’s jointly liable for the whole amount. If the firm goes bust, you can get redress from the card firm instead – valuable extra protection.

2. Are you getting what you’re entitled to?

Many families and individuals – both in work and out – are eligible for state help for their income.

The web of benefits and tax credits stretches much further than many people think, so it’s important to check you’re getting what you’re entitled to. Use the benefits checker at www.mse.me/benefits to give yourself a check up. It’s worth noting more than a million low income pensioners are failing to collect their pension credits.

3. Beware income eaters.

If you’re worried about the future, don’t sign up to what I call income eaters. These are contracts for regular payments that lock you in. I’m talking about things like gym membership, pay-TV and hire purchases. Check your active direct debts with your bank to ensure you are not paying each month for things you no longer use.

4. Check your savings are safe.

While we’re not saying they will, big banks can collapse. The government guarantees £85,000 per person, per UK-regulated financial institution. If you’ve more, spread it in multiple accounts. With the eurozone also in trouble at the moment, it’s especially important to look at the protection of European banks operating here too. If they’re UK registered, as Sanatander is, then the same £85,000 protection as any other bank applies.

Yet some, such as Dutch bank ING Direct, are protected by their home country’s government. So you’d have to rely on it to help.

5. A warning to freelancers and the self-employed.

As your income can be particularly precarious, don’t forget to put money away for tax. Unlike employees, who are paid after tax, freelancers are usually paid pre-tax. Always think: “For every £100 I’m paid, £30 isn’t mine, it’s the taxman’s”. Put it elsewhere to save temptation.

First published at 13:27, Wednesday, 13 June 2012
Published by http://www.nwemail.co.uk