The UK economy faces a potential £35bn hit from the Middle East energy crisis, with a think tank warning that a recession could occur this year if the crisis persists. Adding to the gloom, a separate report predicts 250,000 job losses by mid-2027 if economic growth stalls. Against this backdrop, money expert Rajan Lakhani of personal finance app Plum offers practical advice to help individuals prepare for tougher times.
Lakhani urges people to overcome financial avoidance by conducting a monthly audit of essential and non-essential payments. Using apps to automate or overview finances can simplify expense management. He also advises asking for a pay rise with evidence of below-market salaries, and to weigh the long-term progression at a current employer against a minimal salary increase elsewhere.
Building an emergency fund of three to six months’ expenses is crucial, but this money should be kept liquid in high-interest savings accounts (currently around 4.25 per cent or more) rather than invested. For additional income, Lakhani recommends side hustles such as selling unused items on Vinted or eBay, freelance work, pet care, or renting out a car or spare room.
Focusing on high-interest debt should take priority over saving: paying off credit cards or loans fully, or transferring balances to a zero per cent card, can reduce interest costs. Finally, Lakhani stresses the importance of accepting that prices will continue to rise, so proactive budgeting and debt management are essential to weathering the storm.
