HOW TO SOFTEN THE CRASH

RECESSION is coming. The Bank of England boss said it, the Prime Minister's warned of it, and WE'RE about to feel it.

My crash course in recession-proofing your finances carries no guarantees, but it should help you prepare better to roll with the punches.

We were last in the grip of recession in 1991, so anyone under 35 probably wasn't working when it happened.

Its impact isn't pretty. At worst it means job losses, uncertainty, home repossessions, pay cuts or freezes, and firms big and small going bankrupt.

Yet even if unemployment rises, as anticipated, to 2.5 million, most people working today will STILL be in employment even in the middle of it.

However, you may be one of the unlucky ones who lose their job. So don't dilly-dally, get ready to rally. Here's my top tips on preparing for the big squeeze.

PAY OFF DEBT

DEBT can't just be cancelled, and being lumbered with it mid-recession is a nightmare. If you've got savings or ANY spare cash, throw it at clearing your debts. After all, the cost of interest is usually MUCH higher than interest earned on savings.

OVERPAY YOUR MORTGAGE

AS the biggest monthly outlay, anything you do NOW to reduce the hit will pay off during the bad times.

With steep mortgage rates, sticking money into your home loan is actually a bit like saving at the mortgage rate, but TAX-FREE. For most, that's pretty much unbeatable and totally SAFE.

Better still, reducing your loan size boosts your chances of cheaper deals when you remortgage.

Find out more at www.moneysavingexpert.com/payoffmortgage

BEWARE INCOME EATERS

IF your industry is likely to be hard-hit and redundancy looms, avoid what I call 'income eaters'.

This is where you sign up to payments which take a whacking chunk out of your monthly earnings AND lock you into a set period.

These include gym memberships, mobile phone cashback deals, any hire purchase such as for a TV, new car loans and school fees. If you HAVE to sign up, bag deals with shorter lock-ins.

PROTECT REPAYMENTS

I'VE ranted here before about Payment Protection Insurance (PPI) yet it's not the product but the MIS-SELLING I hate. PPI is a simple idea-fall ill, suffer an accident or be sick and off work, and specific policies will pay your loan, credit card or mortgage payments for 12 months.

The usual problem is, when PPI is bought from lenders alongside the debt it's DISGUSTINGLY and OUTRAGEOUSLY expensive.

Yet similar products from standalone providers like Paymentcare or British Insurance cost nearly a TENTH of the price, so if you couldn't meet repayments, it's a better proposition.

Always check terms are suitable, though, and if you've 'foreseeability' of redundancy-meaning you genuinely know lay-offs are coming your way-the cover may be invalid.

DO A DEBT AUDIT

EVEN with the credit crunch, it's still possible to grab cheap rates NOW to cut the cost of existing borrowing.

As redundancy means your credit score will plummet, it's crucial to sort out your debts before it's too late. So act NOW.

The key weapon is credit card balance transfer deals, where you shift debt to a new card or cards cheaply. For advice see www.moneysavingexpert.com/bts

If you can't bag new credit now, call existing lenders and ask them if they will accept debt from your other, more expensive cards. Remember, move it where it's cheapest. See www.moneysavingexpert.com/shuffle

Trimming personal loan costs is tricky as rates are rising, and plenty penalise you, but see if you can remortgage to a cheaper lender without penalty.

TAX AND BENEFITS

BENEFITS and tax-credit nets spread further than you think.

For families, it's just possible you qualify for benefits if your household income is under £66,350. Take a five-minute check at www.entitledto.co.uk

If you're self-employed then make sure you dock your own pay in readiness for settling your tax bill. It will be crucial in a recession.

Consider every £100 you earn as £65 for you and £35 for the taxman. Stash tax cash outside your normal account so you'll never face nightmares trying to find it. And if you're a higher-rate taxpayer, dock even MORE.

BUILD CASH FUNDS

CLEARED your credit cards? Aim for a six-month savings stash for emergencies (although anything's better than nothing).

If the worst happens, at least you've got some cash.

THINK AHEAD

IF losing your job's likely, start living NOW as if you'd already lost it. Cut back EVERYWHERE, and squirrel away spare cash.

SAVE ON EVERYTHING

MY weekly message is now even more important-DON'T pay a penny more than necessary for goods or services.

Take a day off to scrutinise EVERYTHING you spend, and see if you can get the same for less. Check if you can reclaim PPI or credit card charges-you'll save thousands, freeing up 'buffer' money if the recession hits hard.

A step-by-step guide is available at www.moneysavingexpert.com/moneymakeover

* TV money guru Martin Lewis is the creator of the Consumer Revenge website MoneySavingExpert.com which is packed with information on how to get more money in your pocket.

HOT DEALS ON WATER BILLS?

Q MY mum lives in a three-bedroom house. Is it possible to get a discount on your water bill for single occupancy?

MARIAN HICKSON, via email

A NO, it doesn't work that way. Water bills depend on the rateable value of your house or usage if you've a meter.

My rule of thumb is if you've the same or more bedrooms than people, like your mum, a meter could save hundreds. If a meter can't be installed, you can ask for an assessed charge which means they bill you as if you had one. See www.moneysaving expert.com/water

Q I'VE got a few empty credit cards, is it better for my credit rating to cancel or keep them?

MICHAEL, via email

A THE more credit you have available the worse you're scored. So cancelling cards you never plan to use again should improve it.

ASK MARTIN: Send questions to notw@moneysavingexpert.com

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