Expecting the unexpected can sometimes be an impossible task. While regular expenditure such as a phone or water bill can be budgeted for, your boiler breaking down or covering the mortgage payments after the loss of a job are a lot harder to plan for. An ING survey revealed that 27% of British people do not keep an emergency fund to help them to manage in this situation and if this sounds like you, here are some steps you can take to make sure you mitigate the impact of a financial shock.
The most simple step you can take is to create an emergency fund and this is something you should work towards as soon as possible. An emergency fund will consist of 3 to 6 months’ of your expenses that you can access quickly should a rainy day occur.
It’s a good idea to create a new, separate account to hold your emergency fund and to keep it apart from your regular incomings and outgoings. Another tip is to only put aside what you are able to afford, and it is more effective to build a habit of putting aside small amounts on a regular basis than to save larger chunks here and there.
Something else to remember is to only use this fund for true emergencies. You may have other financial goals such as a holiday or paying for Christmas and while it’s definitely sensible to plan for these, you should use a separate savings account and only turn to the emergency fund when you really need to, such as if your car requires urgent repairs or if you are suddenly out of work.
Another way to lessen the impact of a financial shock is to claim against an insurance policy. It is worth considering what the costs might be to replace a gadget or for veterinary treatment for a beloved furry companion and whether it is worth the price of an insurance premium.
Although it can sometimes be difficult to consider these possibilities, you may wish to consider critical illness or life insurance in the event that something serious happens. This can ensure that you or your family and dependents do not have to worry about significant financial liabilities should the worst happen.
As always, do remember to shop around for the best possible deals, as it pays to not stick to one insurance company or even just one price comparison website. You may also wish to weigh up the risks of having a lower premium in exchange for a higher excess.
For further support with your financial wellbeing, get in touch.