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Everybody is obsessed with saving their pennies, but it’s not as simple as squirrelling money away. There are going to be unexpected costs in life that creep up on occasion. Unexpected costs cannot be predicted, and when there are big problems that require fixing instantly, they can wreak havoc on your finances. Any unexpected expense can leave you without funds for other important payments, like bills. While the best way to avoid being caught out by these is to keep track of your finances, how can you prevent any unexpected costs from drilling a hole in your bank balance?
Set Aside a Small Percentage of Your Income Every Month
You cannot anticipate anything as unexpected, whether it’s a natural disaster or air conditioning repair costs. But you can estimate the costs of repairing your car, your air conditioning bill, or certain plumbing problems. Putting a specific percentage of your monthly income into a separate account is a little way of preparing for these unexpected expenses. It’s almost like having an additional insurance policy.
Look at Your Debt
The big problem most of us have with regards to debt is that it is always there hanging over us, and it’s almost like we are hoping that something doesn’t happen because we know that it’s instantly going to knock our bank accounts into the red. But debt is one of those things that you need to take ownership of, because when you pay some of your debt off, you are able to get out of the hole easier and realise that debt is not something that needs to drill a hole into your bank balance. Make sure that you move your credit card debt to 0% balance transfer cards. But also ensure that you do not use the cards. Additionally, think about debt consolidation methods like the 50/30/20 method, or the debt snowball method. Because having a proper approach to paying off debt is going to be far more beneficial.
Getting Life Insurance
It’s a simple thing, but when we don’t have much money we think of insurance as an extra expense. Life insurance or any other form of policy will give you some breathing space should something happen. For people who are self-employed, it’s a good idea to get some self-employed insurance.
Short-Term Additional Income Streams
You might not like the idea of getting another job, but the gig economy is still thriving, and if you are looking to bump up your balance in the short term so you do have an emergency fund, you could find an additional income stream, even if it is just for a short period of time. You may not like the idea of working an extra couple of evenings a week but even if you did it for a month or two, this can save up a significant amount that you can put into your extra money pot. You can find plenty of additional income streams through companies like Appen, who look for people to take part in projects, and the best thing is you don’t even need to leave your home! Of course, if you wanted to get out of the house you could take a delivery job.
The best way to prepare for unexpected costs is to have them at the back of your mind. Once you have a sufficient amount of money put to one side for unexpected costs, you’ve done the hard work, and this has now become a habit you can maintain.
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