When Every Penny Counts: Expecting the Unexpected When Cash is Low

every penny countsWhen it comes to managing our personal finances, we are all different and while some of us seem to be able to take a potential financial crisis in stride and remain calm while we find a solution, others can get stressed by their lack of preparation for such an event.

Whatever your normal reaction to an unexpected bill happens to be, the underlying point is that if you take steps to be more prepared for a financial emergency, you are more likely to be able to cope and find a way to get back on track as quickly as possible.

Here is a look at how to fight your way out of a tight corner by getting your finances in order so that you are ready for the unexpected. Including details on what sort of savings targets to set, how to find that extra money, plus some good habits to get into and why your credit card should be treated with caution.

Set some savings goals

The best way of preparing for the unexpected is to set yourself a savings goal that deals with your need for some emergency funds.

With a bit of careful financial planning, you could put aside a regular amount of money so that if you are presented with a bill that you weren’t anticipating you have the funds available to deal with the problem without resorting to more expensive options.

Ideally, if you can manage to accumulate the equivalent of between three and six months of income you will then have an excellent safeguard against most financial shocks that can hit your finances hard, even providing a safety net if something major happens like a job loss.

Trying to save that sort of money can seem like an impossible task when you first start putting money away each month into a separate savings account, but if you set mini-targets along the way and then realign your goals when you hit them, that will give you the incentive and confidence to carry on.

Make some cuts

Some people think that they are prudent with their money and couldn’t possibly find any extra savings from their current income without cutting out something they need, but there are always savings to be found somewhere.

Rather than trying to find a specific sum of money in one chunk, it often works well to find small savings here and there that you won’t necessarily miss or even notice. See if you can get a better deal with your utilities, and TV package, then use those savings to put towards your savings goal.

Analyze your monthly budget in fine detail and get creative with every possible option. Even the most prudent and savvy spender will often find that there is a better internet deal or lower insurance rates available, all of which will lead you to find the sort of money that will help build up your savings pot from your existing income.

Get into the habit

When you set up a monthly payment to your utilities and other providers you soon get used to seeing that amount going out of your bank account on a regular basis and it just becomes part of your normal monthly routine.

It is always a good idea to review these payments to see if you are paying for things you don’t really need any more like a gym membership for instance, but aside from this, it demonstrates how easy it is to get into a regular habit when paying for something in this way.

Use that same mentality to start putting away savings on a regular basis. If you decide to set aside any spare money in your savings but without committing to a regular time to do this, it becomes less likely that you will make these payments as regularly as you could.

Set up an automatic monthly payment into your savings account for a minimum amount you have worked out you can afford. That way it becomes a habit and part of your normal routine and you quickly accumulate some spare cash without really thinking about it.

Manage your use of credit cards

One of the most common issues that many people have to contend with when it comes to personal financial problems is credit card debt.

It is so easy to use your card when you are eating out or shopping and then realize that you can’t clear the bill in full when it comes in at the end of the month.

You are then faced with leaving a balance on the card that is attracting interest charges and before you know it you have a credit card debt that is larger than you are comfortable with.

Credit cards are useful if you use them properly, but a good tip is to leave them at home and try to pay cash for things. It will make you think twice before each purchase and will likely create some spare money that you can then put towards your savings goals.

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