An emergency fund is a lot of money saved for unexpected circumstances, such as losing a job, processing an unexpected medical bill, or unplanned home repairs. You have some time to build your emergency fund so that you can regularly set aside smaller amounts of money that add up over time. If you are unable to pay for emergencies, credit card debt or a stack of unpaid bills can be destroyed.
With an emergency fund equipped with money for unexpected events, you reduce the likelihood of you going into debt to cover inevitable surprise costs like a flat tire or a broken boiler if you really want to reduce your stress, you should increase your financial stability.
Here are 5 ways to make saving for emergency in the new year less overwhelming.
- Create A Budget
The quickest way to ensure that you have additional funds to set up an emergency fund is to first create a budget. You will be amazed at where your money goes when you take the time to take care of everything.
Start by being frugal with your spending and pretend like you’re paying off “emergency” but actually put the money in your emergency fund.
So, when the unexpected costs come up, you’ve already put the money aside and have a lot less stress.
- Automate Your Savings
A savings account is a great thing to have, however, a quicker and easier way to save is to perhaps consider using a current account that offers great value and a savings pots feature. By doing this you will be able to set goals and save your cash easily into one (or several) different pots for different goals.
You may also want to consider using the automatic savings feature offered by some banks where every purchase you make is rounded up to the nearest £ and that extra is put directly into your savings. This way, you are saving without even really noticing or thinking about it.
For some people, this might mean moving to a smaller apartment. For others, it means selling the house and buying a cheaper one and paying off the extra debt. It may mean getting a smaller car or forgoing the car altogether to take a cheaper alternative, such as the bus or walking.
Whatever way you choose to view or understand downsizing, make sure to take it very seriously this year. Downsizing also forces you to take a full inventory of everything you own. This is a great opportunity to get rid of all the things you just don’t need.
- Pay Off Your Debt
Studies show that nearly half of Britons have no rainy-day fund. You save hundreds, if not thousands, of pounds in interest a year by lowering and hopefully eliminating your debts alone. Stop using your credit cards and start with the highest interest credit cards first. Then increase your monthly payments to close the high yield as soon as possible.
Negotiate a much cheaper price on these credit cards before you ever use them, but do not fall into the trap of drowning in debt again at a cheaper price. Be sure that you fully understand the terms of your credit card before using it and, if you find you’re too easily tempted by your credit card, consider ending the card altogether.
- Consider Refinancing Your Mortgage
Refinancing your mortgage could reduce your monthly payment and offer even greater savings. Check to see if you get a lower interest rate on your mortgage. If you even cut your interest rate by half a per cent, you will save thousands of pounds over the life of the loan.
If you are able to get a better deal with lower interest rates than in the long run you are cutting your debts and making those monthly repayments a little easier to manage.