ING’s Chief Economist Marieke Blom this week said we have entered a mild recession. Both consumption of households and business spending indicators seem to tell her team so. More importantly, in the same message she said it is not certain in which direction we will go in the next months. There are elements still holding out (like the labor market) so we could have a period where we can spend not as much as we did but it does not need to be dramatic.
All recessions are felt differently
Economists look at the big picture; that is what they do to be able to make sensible statements; too much detail would make that impossible. Underneath that general picture are individual household with their unique circumstances. The math used by the economists could tell we have on average a reduction of spending of 1% which could be 1% growth for the highest incomes and minus 10% for the lowest incomes. One’s financial life is a lot more challenging, stressful and (near) impossible if you are in the latter category.
We have clients from all walks of life; some can afford an active lifestyle, others have not much wiggle room in their budget. And we know for a fact that clients with a generous income also have family members or friends who are now struggling. Some of them are their children completing their education. So you do not need to make a big effort to see the need for financial relief near you.
You may know I contribute to an inclusive society through Schuldhulpmaatje, an organization providing hands-on financial relief with educated volunteers. These teams follow a structured approach which may be useful for people dealing with the sudden surge in expenses. The approach works, and puts people in charge over their financial future by taking on the issues themselves. The volunteers structures the process, opens doors, enables the person requesting support to achieve results. If you also master the Dutch language please have a look at www.schuldhulpmaatje.nl to see if joining a team suits you too.
The road to income excess
The current ridiculously high inflation rate will not stay forever. But it can do a lot of damage until it drops to a manageable level. And the buffer we had we need for things we use that are at the end of their technical life, or for a different purpose. For these reasons alone it is important to motivate people achieving an income excess; the balance of income minus expenses must be positive. This way getting into debt situations can be avoided most of the times.
Do you receive what you are entitled to? This may sound a silly question but you will be amazed how many times we find people do not use income which is waiting for their request. And it may be true this was not missed when there was enough income. New situations, new research.
Can you economize on fixed expenses? For most, the past decade has made life easier to support by subscription or pay per use. Although there are social aspects to consider for some, doing with less of it can bring (even instant for some) relief. Go over your bank statement of the past 3 months and strike what you can without really damaging something else.
Is it possible to reduce expenses connected to behavior? There may be cheaper alternatives than going to the gym, meeting with friends and bringing f&b instead of visiting a bar. You can also reduce the number of visits. The list is endless.
The above steps will create space to absorb the rise in cost of living. We hope it is only necessary as a temporary measure. But for some it may be the wake-up call to manage money with more awareness. You will enjoy the benefits of this for life.