New year, new goals, new bank balance: Help get yourself ready for any economic shocks in 2023

Money Matters: Now may be the time to build up savings and hope for the best while the recession warning klaxons are sounding

New year, new you, new bank balance. It’s the time of year where the post-Christmas comedown lingers and the credit card statement shock sets in, triggering a new determination to make this year the one in which we take control of our money.

We make the usual promises to pay down our debts, put money aside for investments and set some cash aside for a rainy day. But should we be making those standard new year’s money resolutions now when we’re facing a much more financially uncertain world.

Poor 2023 had barely got its foot out the door when the International Monetary Fund (IMF) announced it expected a third of the world economy to be in recession this year.

The IMF’s managing director Kristalina Georgieva said 2023 would be “tougher than the year we leave behind” with “the three big economies – the US, EU and China – all slowing down simultaneously” which is not the news households still scrambling to adjust to a cost of living crisis and interest-rate hikes on mortgages wanted to hear.


While the warning klaxons are sounding, it might be premature to predict the worst just yet with employment numbers strong and savings figures solid. However, like the Scouts it’s always better to be prepared so we asked personal finance experts what money habits we should consider in 2023 to help weather whatever storms are looming on the horizon.

1. Build a savings buffer

In the past, conventional personal finance advice would urge people to pay down personal debt like credit cards first. This was to get out from under the trap of pesky compound interest combined with crippling high rates set for consumers. It made sense to allocate any money coming against a credit card bill to stop the debt increasing.

However, best-selling author of How to be Good with Money, Eoin McGee says it may pay to prioritise building a safety net for yourself first. He advises putting aside three months of take-home pay as a buffer for people who are in full time employment and feel their job is secure.

For everyone else, including the self-employed, he advises six months, something he admits people ‘used to laugh at but then Covid happened’.

The set-aside savings can keep the mortgage paid if redundancies happen or they can be used to keep you from getting into more debt.

“You can use the buffer instead of having to dip back into using a credit card,” he explained.

“I get questions every week like ‘I have €10,000 in savings and €10,000 on a credit union loan, should I pay it off?’ You can’t clear off a debt if it’s going to wipe you out financially. If the car breaks down and you have no cash, you’re going to end up putting it on a credit card with a much higher interest rate than that credit loan which might be 6 per cent.”

He advises making the minimum payments while building your savings up to a point where it’s possible to clear the debt and still have cash left over.

Transferring a credit card balance to a new account with an 0 per cent interest offer for a limited time is also an option but only with a strict caveat.

“That’s good to do once and only once!” stressed McGee. “If you can clear it in six months, do it. Do not use the new card. Cancel the old card even if you get hit with the stamp duty.”

Anne-Marie Gaynor, the financial influencer behind the Irish Budgeting Mammy Instagram account, seconds the advice to build up a personal savings buffer but says she would only divert €1,000 into an account before switching to paying off debts.

“I say €1000 because that covers house appliances or a car breaking down. It might not pay it all but it should pay some,” she said. Her experience as a new single mother in the last recession has made her wary of carrying over credit card debt.

“I lost my job, I had three children and I was €10,000 in credit card debt. I couldn’t even make the minimum payments on the single parent payment I was receiving,” she said.

“Look at credit cards if there’s concerns about a recession, look at getting a loan with a lower interest rate. If you don’t absolutely need it, rip it up now.”

McGee also has an interesting tip when it comes to rainy day funds – give them a name.

McGee says that creating a catch-all “rainy day fund” only encourages people to dip in and out of it at whim. “I mean if you come home from a tough day at the office it’s technically raining and you might do some shopping out of it,” he said.

“It’s really important for savings to have significant and specific names for such savings to build connections.” After all, we’re much less likely to dip into an account named after your children’s school fees or “our housing deposit so we can leave our parent’s box room.”

2. Stick to the basics

As head of economics at the University of Limerick and one Ireland’s best-known economists, Prof Stephen Kinsella is more than familiar with the patterns of Irish recessions and what the downturns did to people’s finances. Despite the cycles of boom and bust, he stresses that, when it comes to personal finances, the “basics are most important” when it comes to riding out uncertain times.

“Spend less than you earn, save a constant percentage of your income, invest in a pension and, after that, in highly diversified products and the future is your friend,” he said.

“In the short term, this year is all about figuring out what the new normal will look like in terms of interest rates and inflation.”

While conceding that inflation will hurt the spending power of saving deposits in the bank, it isn’t all doom and gloom.

“Interest rates rising mean you’ll earn a little more on those deposits too.”

It might be a case of watch and wait when it comes to interest rates.

“The people with the answers are our central bankers. They’ll probably tell us when they know themselves.”

3. Hope for the best; plan for the worst

Anne Marie Gaynor says now is the best time to educate yourself on your finances. There are free resources such as Instagram accounts like her and McGee’s. There are also communities aimed at different demographics, such as millennial women starting off their finance journey, such as She’s On The Money and Girls that Invest. These accounts offer free podcasts with financial experts and spaces for discussion with other people on the same path.

“When you know about how to handle your money and you’re in a similar community of like minded people, you are more likely to be successful in your own budgeting,” advised Gaynor.

She advises people to know what they’re entitled to now if they were to lose their job.

“I’m always surprised that people don’t know what they’re entitled to if they’re made redundant. Look at what you might be entitled to under supports like the Working Family Payment. Depending on the number of children you have, it could be close to covering a mortgage payment,” she said.

It might sounds drastic but she advises people to find out exactly how much money they would receive if they had to rely on welfare payments between jobs and to start identifying any areas of their life they could cut back spending on if they had to. That way you have a clear plan to execute at a time when you might be too overwhelmed with worry to think clearly.

“I got rid of Sky TV in the last recession, subscriptions, things like that,” she said.

It might seem easy to hide from the banks but Gaynor stresses the importance of contacting them up front if you think you might have difficulty meeting the mortgage payments.

“They want correspondence. Look at your rights around reducing payments or going interest only for a while. Stay in contact. Burying your head in the sand only makes things worse,” she said.

4. Look for opportunity

Gaynor lost her job and her partner during the last recession but she said it also gave her something she could build the rest of her family’s future on – a degree.

“I went back to college and got a four-year degree. After I graduated I walked into a job as a nurse with the HSE,” she said. “There are supports and payments if you go back to college: make sure you know what you’re entitled to.”

She also created another income stream by documenting to an audience of nearly 50,000 followers on Instagram her financial journey as she started over from scratch in her thirties. Fans can purchase budget trackers and finance planners from her website.

“All the best businesses were created in the worst times,” according to McGee who set up his business amid the financial crash in December 2008.

“It’s in times like this that unique opportunities arise. If you lose your job, don’t assume the right thing to do is go to another job. You no longer have those golden handcuffs: take it as an opportunity.”