Your finances can largely dictate what sort of life you live and can help save you in times of emergencies. Whilst no one likes talking about money, there are changes you can make in your life, and advice that you can follow, that could see you start making that investment or deposit sooner, but even more importantly than that, have you covered for any future financial problems.
For those saving for a rainy day, here are some ways to budget better and bolster your emergency fund.
CUT A SINGLE EXPENSE EACH WEEK
If you are looking to understand your expenses and live the best life that you possibly can, then making small incremental changes to your outgoings is a sustainable way to put money aside for a larger purchase later down the line.
Cutting expenses on your Wednesday espresso in the local cafe one week, or your Friday night takeaway the next, or even that second bottle of wine you buy to finish off your Sunday roast, can all make one massive difference when considered accumulatively. Each time you make such a sacrifice, put the equivalent money in the kitty for a rainy day.
Setting up a separate ‘emergency’ account into which you pay a small sum each month is a sound idea, giving you a buffer in case your budgeting hits the skids.
The nature of the working world right now is unpredictable and unreliable, and for many, income has become less steady and job security more precarious. Having an emergency fund set up, even if you only contribute a little each week, is essential to avoid any financial surprises that might be lurking around the corner.
DOWNSIZE DEBTS
A great way to hold more power over your finances is to be aware of your debts and what you owe in general. You should assess every outgoing, loan repayment, credit card bill, overdraft charge and the rest, marking them down on a spreadsheet so you have a simple way to give your overall financial health an overview.
This will allow you to visually see your debts, and, if necessary, work on a debt management plan. A debt management plan allows you to distinguish the difference between a priority debt and non-priority debt, and figure out which debts are costing you the most, in terms of money and a negatively affected credit score.
A priority debt can be identified as a type of debt that has more serious consequences when not paid off sooner whereas non-priority debts refer to things such as student loans and benefits overpayments, debts that are essentially less urgent.
Should you need free debt advice, you can speak to one of the following debt charities.
- Citizens Advice can provide free help in person or by phone
- StepChange Debt Charity can provide advice or a free debt management plan (DMP)
- National Debtline can offer free advice by phone and help you set up a free DMP
- PayPlan is an independent provider of free DMPs
- Shelter is a housing charity that can provide advice by phone, online or in person
- Christians Against Poverty can visit you at home to give advice and help you budget
SAVINGS ACCOUNT SAVVY
If you struggle to save, or find it difficult to change your daily habits, then consider the bigger picture and open a holiday savings account, sometimes referred to as a Christmas Club. Such an account receives routine deposits as a percentage of your paycheck, accruing a little interest along the way and keeping that money safe until your next big purchase happens.
It should be noted that such accounts, when done contractually via your bank, may charge you for early withdrawal. As such, it might be a better idea to arrange such payments in a more ‘casual’ way, such as via Monzo’s ‘Create a Pot’ feature.
Many people swear by a simplified, monthly 10% savings rate as a general ballpark figure to aim for. You can set up a monthly direct debit from your primary bank account into a savings app, or take advantage of one of the many savings apps currently out there which can automate this process further for you.
DO A DETAILED AUDIT OF SUBSCRIPTIONS, MEMBERSHIPS & CONTRACTS
You’d be surprised at just how many people continue to pay subscriptions, standing orders and direct debits without even realising. Thoroughly reviewing your actual outgoings, with a fine comb or better yet, your eyes, is an opportunity to identify any further savings.
Should you be paying members of Netflix, Amazon Prime, Sky Go and Disney Plus, for example, ask yourself; do you really need all of them to flick mindlessly and never actually settle on a show to watch? Or, have you got a gym membership that’s currently not being used? Could it be time to cancel it? And don’t get us started on those ‘free trials’ that always get forgotten about, then paid for…do yourself a favour and opt out of all of them straight after reading this.
You might also find savings within your existing energy, internet and phone contracts; do an audit of your usage and see if you’re paying for a service or amount that you don’t actually use.
THRIFT CAN BE FUN
When you think of saving your money, it’s perhaps not something that you think of as fun. In fact, it can often be the very opposite of fun. But for those who embrace the challenge, and try to find luxury in thrift and saving, the whole thing can be a little easier.
*Anything written by IDEAL Magazine is not intended to constitute financial advice. Always consult with an independent financial advisor or expert before making an investment or any personal finance decisions.*