Could you absorb a financial shock?
At a time when the cost of living is rising, the last thing anyone needs right now is a financial emergency. But sadly, as we’ve learned over the past couple of years, there’s a lot in our lives that we simply can’t control.
What would happen if you were to be made redundant, your boiler breaks down and you’ve no cover, or you’ve discovered that someone has reversed into your car in a supermarket carpark.
Could you afford to live without a salary while you look for another job? How are you going to pay for your boiler or for your car to be repaired?
You’re not alone.
Fingers crossed these things will never happen to you, but put a plan in place and should an emergency happen, you’ll be prepared.
In 2020 it was reported that [1]:
50% of people in the UK don’t have any money set aside for emergencies.
One third of workers with a financial buffer say that they only have enough to last one month.
Only 6% of UK working adults have any type of insurance for life’s setbacks, and over 25% of workers under the age of 34 have no insurance at all.
How much do I need in my emergency fund?
As simple rule of thumb is between 3-6 months of your expenses. You can get more specific depending on your circumstances, but this is a good starting point.
If you don’t know your expenses dig out that bank statement and work out where your money goes every month and what your outgoings are.
When you’re happy that you’ve worked out your figures, multiply by three or six. It’s more than you thought isn’t it!
Building your financial safety net
This money should sit in a separate savings account so you aren’t tempted to spend it. Don’t worry too much about what returns you are getting as that isn’t the aim of this money.
Automate a monthly amount so you can build the pot to the required level.
You may have noticed when scrolling through your bank balance that there are things that you spend money on that you don’t need. Stop wasting your money on them and pop some of that money into your savings instead. Even the smallest of savings really add up over time.
Once you have built your safety net you can look to direct this money to other avenues.
As well as your safety net you also want to have appropriate insurances in place such as income protection or life insurance to protect you and your family should the worse happen.
For extra peace of mind, feel free to contact me for further advice. To take the weight of your shoulders it’s good to know that you don’t have to worry about loss of earnings or unexpected bills.
[1] Opinium Research. Sample size of 4,011 UK working adults.