Financial worries are one of the leading causes of stress in the UK. An unexpected large bill, the loss of a job or sudden illness can all have a massive impact on your ability to make ends meet. The coronavirus pandemic has shown us that things can change in an instant, and it is essential to be prepared for a financial crisis.
Fortunately, there are plenty of ways that you can ensure your finances are healthy enough to withstand any future shocks. It will take a combination of bolstering savings, reducing outgoings and preventative measures, but you will find plenty of ways to make your future finances more secure.
Build A Strong Cushion Of Savings
Up to 19% of Britons have under £100 in savings, with 13% having no savings at all. This means that an unexpected expense can have a devastating impact on their finances, potentially leaving them unable to pay essential bills.
It is essential to build up your cushion of savings to ensure that you have a safety net if the worst should happen. It is a good idea to save up around two weeks’ wages as a cushion to keep you safe in the event of a financial crisis.
Make A Plan
It is important to plan for different challenges life might throw your way. For instance, you could consider how you will react to various common issues, such as emergency repairs for your home or car, losing a job or becoming unable to work due to illness or injury.
Consider what you will do if any of these things occur. For instance, consider what kind of assets you could sell off to help make ends meet. It may also help to keep upskilling and ensure that you are as employable as possible, which will help you find employment if you lose your job.
Track All Your Spending
Keeping a close eye on your spending can be the ideal way to reduce your monthly outgoings. This allows you to save more and makes it easier to manage your finances if your income disappears.
Consider using a budgeting app to keep track of what you spend your money on. You can then review your spending at the end of the month and identify areas where you could reduce spending, for instance, by cutting out a daily coffee run before work.
Consider Appropriate Insurance
If you lose your job, income protection insurance can help ensure that you still have money coming in while looking for a new job. There are a broad range of policies that can help if you become unable to work due to illness or injury or lose your job. It is a good idea to discuss your options with expert financial planners like Drewberry, who can assess your needs and give you the best recommendations.
Shop Around For Better Deals
Many of us stick with the same utility providers as the hassle of moving can feel like more effort than it’s worth. However, it is a good idea to consistently assess the options out there to help you find the best deal. Consider using a price comparison website to find the best deals on utilities, mobile phone plans and other services.
It may help to take advantage of welcome offers or incentives that some companies offer for new customers. Always read the fine print to ensure the deal will be worthwhile in the long run.
Talk To A Financial Advisor
Talking to a professional financial advisor can help ensure you understand the best ways to improve your finances. You should find a reputable and experienced advisor who can help you make good planning decisions for the future. It is best to let them thoroughly assess your financial situation and ensure you take any advice they give you.
Keep Your Debts Low
Paying down your debts can be a great way to ensure your finances remain healthy even if you’re hit with a financial crisis. The lower your monthly repayments for things like loans, credit cards and mortgages, the better. Sticking to less than 30% of your credit limit can also help ensure that your credit score is strong. This can allow you access better terms when you do need to take out financial funding like mortgages.
The Bottom Line
Finding ways to protect your income in the event of a financial crisis is crucial. You will need to ensure you have a good cushion of savings and that you have a plan for some of the more common scenarios you may find yourself in. Reducing unnecessary expenses, keeping debts low and talking to professionals to help you find the right solutions can be invaluable. You should also consider your insurance options that can be very helpful in ensuring you stay financially secure in the event you are unable to work.
