Five ways to protect your finances in uncertain economic times

For some time now it feels as if we have been living in uncertain economic times in the UK. Rising prices, hikes in mortgage rates, fluctuating interest rates, and of course the recent stock market reactions to the US tariff situation. Everything seems very fragile and it can all be overwhelming.

But there are a few steps that you can take to protect your finances during uncertain economic times. Whilst nothing financial is ever completely guaranteed, there are always some down to earth principles that may be able to help. 

Here are our five suggestions as to how to protect your finances during economic uncertainty:

Live within your means

This can sound like an old-fashioned concept, but is a life mantra well worth sticking to. Many of us overspend from month to month, which means that debt gradually builds up. And before you realise it, that debt can become a major problem that you can’t manage. Even in strong economic times, this is not an ideal situation to be in, but when financial matters feel very uncertain it is especially worrying.

So if this sounds familiar, the best thing to do is to put time and effort into getting on top of your monthly spending. Our recent article Five steps to getting out of debt in 2025 explains how to create a realistic monthly budget to manage your finances, including tips on how to increase your income and/or reduce your expenditure to be able to live within your means. 

If you are able to do this, and can put a halt to using overdrafts or credit cards to get through the month, you will be strengthening your finances against whatever further economic changes come our way.

Balance debts and savings

You may be familiar with the term “net worth”. This is a quick assessment of how healthy your finances are. You can work out your net worth by subtracting your liabilities from your assets.

Liabilities means everything that you OWE. For example, mortgage, loans and credit card debts. 

Assets means everything that you OWN. This includes the market value of your home, your car, savings, investments, cash in the bank and any other valuable items.

So, for example, if your assets were £100,000 and your liabilities £40,000 you would have a net worth of £60,000.

The ideal situation is to have a positive net worth, and to work on gradually increasing your overall net worth. Financial experts often recommend the 50/30/20 rule to managing monthly income:

• Spend 50% on essentials, including debt repayments
• Spend 30% on things that you want
• Save 20%.

This may seem like an impossible dream, especially if you are currently using 100% of your income just to keep afloat. But it is perhaps something to try and aim for in the future. 

But whatever your current financial situation, it’s important to try and get a good balance between debts and savings. For example, if you have some savings that are earning less interest than you are being charged on a debt, for example credit card repayments, it would make sense to use some of those savings to reduce your credit card debt. 

Similarly, if you are spending all your money paying off debts at high rates of interest, it may be a better idea to take out a debt consolidation loan at a lower rate of interest and use the money saved to start building some savings alongside paying off your debts.

Put money into property

Bricks and mortar is usually a sound financial investment. So if you own your own home, a good way to future proof your finances is firstly to make sure you keep up with the mortgage payments, and secondly to aim to get your mortgage paid off as soon as you possibly can.

If you are in the unpleasant situation of having fallen into debt, there are some debts that are more important to pay than others. These are known as priority debts and include mortgage or rent, council tax and energy. There could be serious consequences if you do not pay them.

It is particularly important to keep up mortgage payments as failure to do so could ultimately lead to you losing your home. So make it an absolute priority to keep up your mortgage payments, and contact your lender straight away if you are in the situation where you cannot do this, as there are various ways they can work with you to find a way forward. 

Loans 2 Go also provides details of sources of free money advice that may be able to help.

If at any stage you are able to increase your mortgage payments, this can be a huge financial advantage. Making even small overpayments will reduce the total amount of your mortgage and also the associated interest you have to pay. The more you can do this, the more you can reduce the length of time you have to pay your mortgage.

You can get an idea of the impact of overpaying your mortgage by using the Money Saving Expert mortgage overpayment calculator here.

Maximise your pension contributions

The world of pensions can seem very bewildering, but the earlier you start pension planning, the more likely you are to be comfortably off financially when you retire. Depending on your year of birth, you will be able to get your state pension at age 66-68. But as well as the state pension, if you are employed, are aged between 22 and state pension age, and earn more than £10,000 per year you should automatically be enrolled into your occupational pension scheme. 

In an occupational pension scheme your employer will pay money into it, usually at least 3% of your salary. You will also usually have the option of making extra payments into your pension, which not only increases the value of the pension itself but also reduces the amount of tax you have to pay, as pension contributions are taken out of your salary before tax is calculated on it.

Even if you have an occupational pension scheme, you are also eligible to take out a private pension. You can make payments into this on either an occasional or regular basis, and payments are also usually eligible for tax relief. Private pensions can be accessed earlier than the state pension : currently from age 55 but increasing to age 57 from April 2028. You can also withdraw up to 25% of its value tax free, which could provide useful income if you want to retire early.

There are many different types of pension funds, some of which are based on stocks and shares whose value can go down as well as up. So if you do want to invest in a private pension, it is worth seeking professional financial advice before doing so.

Don’t risk money you can’t afford to lose

The stock markets have hit the headlines recently, with many investors concerned about losing money they have invested. Other experts have been saying that now is a good time to buy stocks and shares as their value will increase.

If you are in any way impacted by stock market fluctuations – for example your pension fund – it can be a worrying time. The general wisdom seems to be that long term investments such as stocks and shares will always be subject to fluctuations, and there is no need to panic if there are falls – even seemingly dramatic ones – as they are liable to bounce back in time.

However, if you are new to the stock market and are tempted to invest when values are low, extreme caution should be advised. Stocks and shares are designed to be long term investments, rather than a tool for making a quick profit. Values can always go down as well as up. So the important thing is never to risk any money that you can’t afford to lose. Because there is no guarantee that you won’t lose it.

If you have a bit of money to invest and the economy is uncertain, it may be a better idea to put the money somewhere safe such as an ISA, a savings account with a fixed rate of interest, or Premium Bonds. Each of these would protect your original amount of money and also earn you some return on your investment. But if in doubt, seek professional financial advice for ways to future proof your savings.

We hope that the above information helps you to take steps to protect your finances in the uncertain economic times in which we are living. And if at any stage you need a quick boost to your finances, remember that Loans 2 Go offer a range of personal loans that may be able to help.

For more useful financial and lifestyle tips, visit us here again soon at Loans 2 Go.