There is never a good time for a financial emergency. However it pays to be prepared to ease the burden when the unexpected occurs. A leaky boiler can cause unwelcome flood damage, or a vehicle breakdown may need costly repairs. We can’t always be prepared for the physical or emotional challenges life brings, but we can take measures to be prepared to handle the bills. Here we look at how to save for a rainy day
How to Save for a Rainy Day
It can seem impossible to spare any funds to save for a rainy day. However it’s always a good idea to have an emergency fund set aside to handle life’s emergencies. This gives you an amount to fall back on when a financial emergency occurs. Without this option you could be looking at costly loans or credit which can drive you into unmanageable debt. However tricky, this is the very reason you want to build up an emergency fund. You can pat yourself on the back later when you save yourself a lot of trouble when the worst happens. Here are some simple steps to help you.
Some financial experts recommend saving 3-6 months worth of living expenses, and although this is certainly a goal to aspire to, building an emergency fund of this size is an intimidating undertaking, and serves to simply put you off before even getting started. It takes time to build savings and Rome wasn’t built in a day so it’s sensible to start out small and build from there. Try not to set a large goal. Instead try to separate off a small but regular amount to save for a rainy day.
Use a Separate Emergency Savings Account
Open a dedicated savings account, which can keep your savings separate from your daily spending account. Most banks offer a range of dedicated accounts for savings, usually with preferable rates of interest. The main points should be that it’s easy to deposit and of course, that it will be easy to access in the evening of a financial emergency.
Set up Automatic Deposits
A brilliant way to save for a rainy day is to set up automated deposits. Set a small amount so this doesn’t upset your cash flow. You can always top up your savings further when you feel able to. If you choose to automatically deposit a small but regular amount, the savings will soon start to add up, without any effort from yourself.
It Pays to Pay Yourself
Once you’ve started to save for a rainy day, you’ll want to find ways to top up your savings more substantially. Add a regular deposit to your savings into your monthly budget. Treat it like paying yourself. This will be especially useful if you choose to set yourself a higher goal. Commit yourself to adding any bonuses or refunds to your savings.
Boost Savings by Cutting Expenses
Now you have a taste for saving, here are a few ideas to help you save up faster
- Eat at home more often
- Use a meal plan based on seasonal produce
- Make a shopping a list to stick to when shopping for groceries
- Review your contracts and memberships
Individually these small cuts may not seem like a lot, but once they add up it can all make a significant difference in the long run. You’ll probably have ideas of your own that suit your lifestyle.
Review Your Budget Regularly
Do you wonder where it all goes? It’s common to find your paycheque running low before the end of the month. Make a budget that includes all of your income and outgoings to help you see where you are spending your money. Perhaps there are some ways to streamline your spending like, cutting the number of subscription services you use regularly. Make sure you allow yourself a realistic amount for extras and treats. As long as you stick to a limited amount, you can still enjoy yourself, while choosing when and where to save your money.
Use the Emergency Savings Only in an Emergency
This may seem obvious but think about what you deem an emergency before you dip into your hard won savings. Anything essential that poses a health or security risk, or that stops you going to work, like a car breakdown. Sadly a sale at your favourite retailer doesn’t count.
Start Saving an Emergency Fund Sooner Rather Than Later
Saving for a rainy day with an emergency fund can make the difference between financial security and credit fuelled disaster. Save little and often and top up more whenever you can. Automate your savings and cut costs with a monthly budget. Don’t be tempted to dip into your savings unless it’s a real emergency.
Prestige Business Management Works for You
Prestige Business Management can help you streamline your tax and ensure that your financial products are working hard for you, so you can save money and focus on your earnings. Find out what we can do for you. Call us today on 0203 773 2927.