I’m a money expert – this is how everyone should prepare for a financial shock

With almost five years of soaring living costs, it’s inevitable we feel squeezed financially – but there are practical ways to manage

When it comes to the economic health of the UK, opinions aren’t so much divided as huddled around the same conclusion: things are not going particularly well.

Following a brief technical recession in late 2023, there have been moments of hope – certainly, the government has been pinning all their ambitions to raise living standards on the growth of the economy. But slower-than-forecast growth in the second half of 2025 has put a dampener on some of those hopes, to the point where people are starting to wonder what a possible recession could mean for them.

The impact of a recession on individual households will depend on circumstances, and no two people will be affected in the same way.

For context: a recession is technically defined as two consecutive quarters of negative economic growth. But in reality, it doesn’t always show up in such neat and tidy terms. We’ve already endured almost five years of soaring living costs and tight household budgets, so you may be asking yourself, what difference would a recession even make? There are certainly indications that households are already feeling some of the telltale signs, even with no recession confirmed.

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“I’m seeing the pressure first-hand,” says Emmanuel Asuquo, financial advisor. “Families are struggling with higher mortgage payments, people are cutting back, and small business owners are worried about keeping staff on.”

According to Asuquo, interest rates and rising costs are forcing everyone to rethink how they spend. “If inflation doesn’t ease soon, we could slip into a recession. The good news is, it’s unlikely to be as deep as 2008, but the squeeze people are feeling is very real.”

So a recession is not guaranteed, but there is absolutely no harm in prioritising financial resilience in the face of circumstances beyond your control – being proactive can help soothe your anxieties, as well as provide a practical safety net. That way, if a recession happens, you’ll be prepared. And if it doesn’t, you’ll reap the rewards of paying your money some attention.

Here are some tips to help you recession-proof your lifestyle ahead of time.

Face the facts

Do a full financial audit. So many of us live with our heads in the sand when it comes to money – especially if we feel things aren’t going too well – but now is the time to face it. Set aside some time to look at your assets (what you own), your liabilities (what you owe) and your budget (what you earn and what you spend). Get comfortable with the full picture, and see if you can identify any changes you would like to make.

Open up

It’s very important to talk to your partner – if you have one – about your financial plan and how you might navigate a tough financial period together. Now is a good time for radical honesty: if you have any debts or other financial commitments that your partner doesn’t know about, it’s important to share them so that you can tackle them together.

It’s also worth opening up to friends and family about any concerns you have – both for moral support and so you can set expectations for scenarios like Christmas, holidays, and birthdays. Knowing that others understand why you’re not spending freely takes a lot of social pressure off.

Shore up your safety net

Create an emergency fund – or give it a boost, if you already have one. Your emergency fund should be kept in a cash account with instant or easy access, and the best interest rate you can find. The amount you aim to save will depend on your circumstances. If you live with your parents or your mortgage is paid off, you’ll need less to survive; whereas if you’ve got dependents and high basic living costs, you’ll want a healthy sum saved. This fund is designed to cover you in the face of a recession-driven job loss, if you become too ill to work, or if you have a large, unexpected expense. A good rule of thumb is six to 12 months of expenses (not income), but if this feels intimidating, start with a week and go from there.

Reduce your liabilities

Prioritise paying off or reducing high-interest debts, like credit cards. Doing so will reduce your monthly outgoings, put less pressure on your income, increase your capacity to save, and give you a bit more mental breathing space.

If you need a little help getting a handle on your debt, apps like Incredible streamline the process. You can also speak to your lenders about interest freezes and goodwill gestures that could give you a bounce back in the right direction. For problem debt – where your monthly repayments are not affordable – contact StepChange, National Debtline, or Christians Against Poverty for regulated, impartial advice, and possible access to more formal schemes.

Uncreep your lifestyle

Most of us have experienced lifestyle cree: where you make more expensive choices as your income increases, eating up any extra cash. There’s no shame in wanting a more joyful – or even comfortable – life for yourself. But sometimes we can get a bit carried away and end up overladen with financial commitments that we don’t need or even really want.

Reevaluate some of those choices: does the boutique gym membership, coffee subscription, or expensive lease car really give you something that you couldn’t get from a cheaper option? Ringfencing some things that add to your quality of life is important, but it’s often possible to slash your expenses without denting your actual happiness too much. Remember, you can cut some of these right away, whereas others might take more time, like the end of a contract.

My husband and I embarked on this journey in January, and the feeling of freedom and lightness it’s given us has been huge.

Don’t give in to doom

Finally, try not to let the negative outlook affect your mindset too much. Yes, caution is advisable, but many good things can and do happen during recessions. You could still land that job, get that contract, or get approved for that mortgage. Don’t let a recession – whether we have one or not – stop you from shooting your shot.

If we do slide into a recession, it might be brief. Following these tips to insulate your lifestyle from the impact should help you to realise that it doesn’t have to be a misery sentence, or a reason to put your life on hold. We’ve all had to do that enough in recent years, after all.