- Personal Finance
How To Manage Your Money For Life's Unexpected Emergencies
Smart Advice For Securing Emergency Savings
Poor money management can make life more difficult than it needs to be and one of the most important financial moves you can take is to have money put aside for those costly events in life that are unexpected.
Creating A Safety Net
It may seem hard or you may think it is impossible to achieve but it really is worth having a safety net of money in case of emergencies. If an unexpected and expensive situation occurs and you don't have the money available, borrowing and paying interest on the loan may be your only option. Unexpected expenditures that require instant access to extra cash can occur at any time. These can be anything that can't be paid for out of the normal budget, such as unplanned major repairs required to your home or car, illness preventing you from working if you are self employed, a family crisis, or legal issues. Events like this can easily flip a life of being financially stable over to a state where living in debt is the result.
Where To Save
Ideally, and if possible a minimum of three months worth of money should be put aside for emergencies. This money should be kept in an easy access account, but not so easy that you are tempted to dip into it. A good idea is to open a separate instant access savings account, with a direct debit set up from your current account into it. It may appear to be an impossibility to raise that amount of savings but by managing to put away a little less than 10% of your take home pay, you will achieve this amount in about only three years. The best action is to set up the direct debit and then leave the savings account to grow, considering it independent from your other financial assets, unless required by an emergency that can not be covered with your normal budgeted.
Starting Is The Important Part
If you really can't afford 10% of your income, start with what you can. Then, if you get a pay rise or a lump sum of cash such as a bonus, don't spend it! Put this extra income into your savings account before you even have time to start considering other 'options' for it, otherwise you will soon adjust to having that money to spend and it will be absorbed into normal living expenses. If you finish paying off for something, continue the payments into your savings account instead. This way you won't notice any difference in your usual allowance but your savings will benefit.
Peace Of Mind
It may take a change in attitude and some changes to lifestyle but the peace of mind that can be achieved by managing your money and creating a safety net of cash can not be measured. It will take away the worry of where the money would come from in a time of crisis, and the feelings of empowerment and control over unexpected events will allow you to enjoy life more to the full.
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