Recession: Proofing your assets

For a long time it seemed like it could never happen, but in the past few years the chance of a bank completely failing has become a real one. On September 14, 2007, panicking British depositors withdrew £1bn from their Northern Rock accounts, and over the course of the next year other banks including Bradford & Bingley, RBS and HBOS all fell victim to the credit crunch.

Fortunately for the individual, the chances of actually losing money if their bank goes down are slim. All UK-regulated accounts are covered for up to £85,000 by the Financial Services Compensation Scheme (FSCS), and if your bank collapses you should get 100% of your money back within seven days, up to this maximum limit.

Yet this still leaves account holders with one week of complete exposure. That being the case, it is important to prepare yourself now for the day you may find you have no access to cash.

Begin by comparing your earnings against your outgoings. In this way you will know exactly how much ready cash you need access to in the event of your banks collapse. Then, spread your savings across more than one bank. In this way your two accounts will act as a back-up to each other, should one of them fail. Ideally you should not have more than £85,000 in each account, to ensure that all of your money is covered by the FSCS.

Another step you can take is to re-examine your personal finance. If your bank collapses, it will be easier to cope if you have less immediate expenses. Energy bills can often be greatly reduced by cancelling paper statements, paying by direct debit, combining gas and electric bills and ordering online. The other obvious step is to turn off lights and appliances when you leave the home.

For internet, telephone and TV, consider buying a package that includes all of these services. This will usually be cheaper than paying for each service individually.

Other bills to reduce include your insurance premiums, although you should ensure that any savings made do not come at the expense of your cover. Shop around for a better offer on your existing insurance, and search for multi car insurance UK online to find out if you can bring costs down by combining your cars on to one policy.

In the very worst case scenario, your last line of defence may well become your credit card. If this is your only access to cash, you will want to make sure that the credit limit on it is such that it can get you by. If you are able to, it would be a good idea to pay off some of your credit card debt to avoid interest charges.

Finally, take steps to make sure that a sudden lack of cash will not have you starving to death. Stockpiling non-perishable food may seem like an over-reaction, but it is better to have it and not need it, then need it and not have it.