How to Survive a Financial Disaster
Disaster can strike at any moment, and it could be almost anything and it could affect your finances. From illness to redundancy to global financial crisis, there are a whole myriad of different ways that you could be affected.
However, there is no use simply worrying. Act now and you’ll be prepared for every eventuality. Here’s how you can stave off financial ruin.
Make Plan B
You should create a list of every household expense. From your rent or mortgage and groceries to excursions and leisure activities, make sure that you don’t miss a thing. Now, begin to eliminate everything that isn’t vital to your survival, such as gym memberships, cinema trips, etc. You should be left with the bare bones of what you need to survive.
Think about what you might do to meet this number if you experience a loss of income.
Start Saving
Savings will help you cover your bare bones should you lose your income, so if you don’t have any, start now. Shop around for a good interest rate, looking at Isas and savings accounts. Usually accounts that have restricted access have better interest rates.
Ideally you’d have two accounts, one for short term goals and one for long term goals. You should aim for saving 10% of your monthly salary that you don’t touch. Have 3 months worth of your bare-bones budget saved to provide a cushion should you lose your income.
Pay off Your Debts
Credit card debts are one of the things that make tough financial times even tougher. Try to ensure that you pay off your balance in full at the end of the month.
If you have outstanding debt, then you need to begin paying this off. There are several different methods of paying debt off, including the snowball and the avalanche method.
Reduce Expenses
Reduce the amount of superfluous expense that you have. For instance, if you get a coffee from the coffee shop every morning, why not save that £3 every day and make a flask of it at home? Consider carpooling with friends and go to the library and rent entertainment instead. It’s easy to reduce your expenses when you start thinking a little bit more creatively.
Insurance
Insurance can be a life line in a disaster. Whether it’s buildings insurance or income protection, insurance can really make a difference when it comes to something going wrong.
Diversify
This applies both to assets and income. If you only have one source of income and that income fails, then you are in trouble, if on the other hand, you have more than one, you have something to fall back on. The same applies to assets. If you put all your savings in one account, and then that bank goes bankrupt, then all your savings have gone. So, diversify, spread the risk and make sure that your back is covered.
