The spontaneity and unpredictability of life are both wonderful and terrifying. The fact that we don’t know what’s around the corner is what makes life so exciting, but surprises aren’t always a good thing. When it comes to your finances, it’s always a good idea to have a plan B. You never know when you may need to call on a rainy day fund. If you don’t have backup plans in place, here are some tips and tricks to help you prepare for the future.
In an ideal world, we’d all have a savings account that boasted a healthy balance. In reality, many of us find it hard to save because we don’t have a huge amount of money left over at the end of the month. Once you’ve paid the mortgage or your rent, electricity, and water, you may not have much left to put aside. Factor in the cost of commuting, buying food, and bringing up kids or caring for pets, and it may be a struggle to make ends meet. If you do have a little left over each month, set up a savings account, and top it up on a regular basis. If you tend to spend what’s in your account, it’s a good idea to set up a direct debit. This way, you can make sure you’re adding to the total every month. Even if you only save a small amount, at least you’ll have a pot to delve into if something crops up unexpectedly.
There are two main ways to save more money. One is to try and boost your earnings, and the other is to try and reduce the amount you spend. If you already work full-time, it may be difficult for you to increase your salary without spending every hour of the day at work. However, there are possibilities. Some people like to add to their weekly wage with a sideline, and there may be a chance of taking on overtime now and again or switching to shifts that are better-paid. If you can’t physically work more hours in the day, it’s a good idea to have a good look at your spending habits. Could you spend less on your grocery shopping? Are you paying too much for your TV package? Are you missing out on incentives and better deals because you’ve been with the same energy provider for years? Could you spend less on your social life or gifts for friends and family? There are usually lots of ways you can scale back without making major changes to your lifestyle.
Once you’ve got a savings account up and running, resist the temptation to dip into it unless you really need to.
The majority of people have debts of some kind. Most debts are related to mortgages, but you can also have credit card and store card debts and outstanding payments due to energy companies, phone networks, and local councils. If you’re in debt, getting out of it should be your priority. If you just have a mortgage, and you’re doing fine with the repayments, you don’t have to worry too much. If you have credit cards, make sure you’re paying off your cards as you go. If you keep spending, you’ll be paying more and more interest, and before you know it, you could be in serious trouble. If you find it hard to resist spending, stick to a card with a low credit limit, and set up direct debit payments from your account. If you really can’t control your spending, consider cutting the card up or giving it somebody to look after so that you can only use it in an emergency.
When you have debts, you don’t just have to think about the money you owe. You may also incur penalty charges, and interest fees can boost the figure significantly. If you’re trying to pay off debts, get organised, and sort out what needs paying first, and what’s costing you the most. Look at when payments are due, and work out how much interest you’re paying. Tackle the debts with imminent deadlines, and then move onto the high-interest payments. If you have a credit card, consider making a balance transfer and enjoying a period of 0% interest. This can help you save money on interest charges for a period of time.
If you’ve got to the point where you don’t know what to do, and you’ve got debts coming out of your ears, seek impartial debt management advice. There are various options available, and it’s best to try and get into the black as quickly as possible so that your financial situation won’t affect your future plans. If you fall behind with payments, this can affect your credit rating, and it can also contribute to anxiety and depression. If you have a low credit score, this can make it difficult for you to borrow money if you do need an emergency fund or you want to take out a loan for a business venture or a mortgage for a house. Arrange an appointment with a financial adviser, and explore the options. The sooner you do this, the sooner you can start looking forward and feeling more optimistic about the future.
The importance of insurance
Insurance should form an important part of any individual’s backup plan. Insurance policies offer protection, and they can help you plan for the future. By investing in insurance, you can protect your assets. If you have cover, this could also help to prevent situations when you have to pay out a lot of money from arising. If you have travel insurance, for example, and you fall ill on holiday, your policy will cover the cost of treatment, rather than you having to shell out hundreds, even thousands, for the care you receive. If you haven’t already got insurance for your home and its contents, your car and your health, it’s time to shop around and start comparing policies. If you have children or you’ve taken out loans, or you own a home, it’s also incredibly beneficial to have life insurance. Life insurance will help to cover the cost of outstanding debts and provide financial stability for your family if the worst happens. When you start looking for life insurance, you may find that you come across a host of different providers, policies, and prices, and this can make narrowing down the options difficult. If you need advice, or you’re not sure which plan is best for you, seek advice from a financial expert.
If you’re self-employed, it’s particularly important to have a plan B, just in case you develop an illness, or you’re involved in an accident, which results in you being unable to work. If you are an employee, the company you work for will often offer sick pay. With self-employment, this is not an option, but you can take out insurance to cover lost earnings.
When it comes to taking charge of your finances, it’s essential to have backup plans. We never know what’s coming around the corner, and it’s good to have peace of mind that you’ll be able to stay afloat no matter how many icebergs you encounter. Think about setting up a savings account and putting money into an emergency fund. If you have debts, try and clear them as quickly as possible or seek advice if you’re not sure which way to turn. If you don’t already have insurance policies, look into taking them out as a priority. It’s always useful to look and plan ahead.