You might be in a comfortable financial situation at the moment, and possibly even a bit smug about it. It’s great that you have been able to manage your finances well, but are you prepared for a financial emergency? If something were to happen that could change your financial situation such as being out of work or facing a hefty legal bill – would you and your family be able to survive? Below are some useful things to consider when it comes to planning for money emergencies.
Always save for a rainy-day fund
As you get older, you soon begin to realise that there are all sorts of savings you could be making. From high-interest accounts to pension funds, your savings can be diverted to several areas at once. While this is a great thing for your finances, it’s also important to set aside some savings that you can access immediately if you were to find yourself in some financial trouble. There are several ways you can save for a rainy day, and it will be reassuring to know that there’s a pot available to you if you were suddenly faced with some large expenses to pay or are out of work.
Know where to go for help
Being in a sticky money situation can be tough, especially if you’ve never had difficulty before. Knowing where to go to get help could help you to find solutions quicker and get you back on your feet. If for example, you were in an accident that caused a personal injury, you’ll need to know where to go to get the best settlement with a personal injury attorney to help you recover a loss of earnings. You might also need to rely on friends and family to help you through any dark periods, so knowing who you can turn to if you needed to borrow money can help.
Get better at budgeting
When a financial emergency hits your family, it’s time to start budgeting. If you don’t have an existing budget, it’s always a good idea to start one to help you assert greater control over your income and outgoings. When your circumstances change, it’s time to make a new budget. Cutting back can be difficult, especially when you’re used to a certain lifestyle, but when needs must – you need to suck it up and go with it. Cutting back on areas like clothes shopping, entertainment and reducing your grocery bill could all help you to save some extra cash and may only be temporary while you get back on your feet. There are even some great solutions for when your budget won’t stretch to help you make it through this tricky period.
Avoid borrowing that you can’t afford
When things get tough financially, it’s tempting to take out a loan or a credit card to help you out. For some people, this is an effective solution, especially if the money problems are just short-term. If your position is uncertain, you could find yourself with repayments that you can’t afford, leading to problems with your creditors that will drastically harm your credit rating.
Instead of taking out credit and getting yourself into debt, you should look to other solutions that are more flexible or will give you some breathing space like negotiating with your creditors and bank manager to see if there’s something that they can do to help you out. This may seem daunting, but creditors would rather be paid something than nothing at all and may be able to reduce your minimum payments or even freeze them while you get back on your feet.
Make more money
Another way to cope with financial difficulty is to find ways of making more money. There are many ways to make money online that are simpler than you might think. If you have skills that are in-demand, you may be able to take on some freelance or consultancy work that can help you to boost your income during tricky times. Alternatively, you could consider selling unwanted household items through places like eBay to help you make some extra money. Be wary that if you do go down the freelance route, you’ll need to make sure that you pay the right amount of tax and will need to file a self-assessment return at the end of the year.
Dealing with financial difficulty is never easy, but you can help yourself by planning for it. Take steps to manage your money and be sensible with your spending to make sure that you’re in the best position possible should something happen to affect your finances in the future.