Despite knowing they could be caught short on cash, almost one in five* (17%) in the UK admit to not planning their Personal finances at all. So what would you do in an emergency without an emergency fund?
It’s challenging enough to save money for anyone and with a pandemic raging around us it may feel impossible. However, if Corona has changed the way you value money it’s never too late to start saving and growing an emergency fund. Below are some ways you can start saving today.
An emergency fund gives you the safety of a financial buffer that can keep you afloat in a time of need without having to rely on credit cards or high-interest loans. For those in debt it can also stop you going further into debt. Even a buffer of £250 could make a huge difference in times of an emergency.
- Do a financial health check: Look at your current income and budget and get to grips with it. Most importantly don’t shy away from your finances, get everything in front of you and be brutally honest. If you know your finances are likely to be changing due to furlough or redundancy now is the time to assess and amend. Any one-off payments such as a bonus or commission now is the time to set them aside as these could be a real lifeline.
- Look at small balances you may have that you can draw down for example, money in Paypal, cashback schemes, premium bonds, piggy banks, change down the back of the sofa! All small amounts can help so where possible add these into your emergency fund.
- Track and analyse your spending habits. Most of us have the opportunity to make savings somewhere:
Small changes to a daily routine can add up to a large difference. Giving up a habit such as smoking, a daily coffee spend, Friday night takeaways, etc soon build-up (e.g.a takeout coffee at £1.80 could save you up to £468 a year.)
Recognise impulsive or compulsive spending habits and start to apply the “do I want or need this” rule and implement guidelines around your purchases such as:
- Create a 30-day waiting list for big purchases.
- Avoid visiting online shopping websites; delete the apps from your phone.
- Be mindful of your reaction to impulse buying. Always ask yourself, do I need this item, can I wait and save for it instead?
- Learn how to reward yourself away from purchasing - if purchasing is linked to emotions then recognise it and try an alternative activity first: meditate, go for a walk, give yourself time to recognise if that purchase is a want or a need.
Be tough on yourself and your subscriptions - could you do without Spotify? Could you cancel Netflix?
Do you have any renewals coming up for utilities? If so then always negotiate or shop around. New customers are usually rewarded with discounts and you can then look to pocket the difference.
Credit cards - are you getting the best from them? Is there an opportunity to swap to a better deal?
Going through these with a fine-tooth comb will not only allow you to identify immediate changes but also ensure you have full knowledge of your daily incomings and outgoings.
4. Review current breaks that are available. Mortgage lenders so far have been obliged to give a 3 month holiday and it has been confirmed that this will be extended until October 2020. Other utilities and providers are also offering relief so it is worth talking to everyone and ensuring you have the full details so you can weigh up your choices, especially regarding creditworthiness.
5. Check what help is available to you. Extraordinary measures have been put in place by the government to support many through the pandemic. From Universal Credit to a mortgage holiday, it is worth investigating all of your options. If you do receive any back payments you can add these to your emergency fund.
Everyone needs to save for the unexpected. Having something in reserve can mean the difference between weathering a short-term financial storm or going deep into debt.
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