Are you ready for the recession?

Keep it quiet, but the dreaded “R” word is on the way.

There’s been no hiding from the gloomy predictions of the current economic climate. The “credit crunch” has hit the housing market hard and unstable food and energy prices have hit family finances hard, has left many of us just waiting for the recession, defined as two successive periods of reduced economic output, to officially begin.

For some, the reality of the situation has already hit, with company collapses and redundancies becoming an all-too common headline, particularly in the property industry (as well as those industries that serve the property sector), travel, manufacturing and finance sectors.

Recession isn’t going to make the situation any better, meaning that the phrase “prepare for the worst” has never had so much pertinence.

Keeping your debts in check should you or your employer feel the full effects of the recession is essential to ensure that you minimise the effects of redundancy as much as possible and, even in the current credit crunch, there are several easy steps that you can take to significantly reduce your debt repayments.

The first step is to look at using any savings that you may currently have to pay off outstanding debts. Remember that interest on debts accrues much more quickly than interest on savings and in a time where your monthly income could drop significantly, lower debts will equate to lower monthly payments.

Use that money to repay your most expensive debts first, rather than the largest. By paying back those with the highest rate, you’ll be setting yourself up to be debt free much more quickly.

Another major step is to look at your plastic. Do you have any debts on credit or store cards? Are you only making the minimum payment? Then switch the debt.

Plenty of credit card companies, even though they may be tightening their belts, offer credit cards with 0% interest on balance transfers for a set period of time. There may be an admin fee to pay (usually around 2-4%) but from that point on, switching your debt will freeze the interest that you’re currently paying and lead to considerable savings – just make sure that you pay your monthly bill on time to keep the deal.

Those easy steps could prove to be a major help in the coming years should the economic crisis stretch your family finances to breaking point. If however, you feel that your debt problems are a serious worry, then make sure that you look in our debt solutions guide to get further advice on the options that may be available.