Financial emergencies are inevitable and unfortunately, we will all experience a time when we are required to make a large payment quickly to solve a problem. But as with anything unexpected, needing to be financially prepared can be difficult to justify, especially if your finances are already stretched.
The prospect of unexpected home or vehicle repairs can be distant problems or may even seem unrealistic, but avoiding the importance of planning ahead can cause significant problems.
As highlighted, financial emergencies can come in various forms and only having one source of finances can be a plan for failure if more than one emergency happens in short succession.
Therefore, having more than one source of financial backing can be important and there are alternative methods to enhance your cash sources for the next financial emergencies.
Alternate safety funds
If you have an investment portfolio then having money invested in low-risk investments can be a viable solution to be able to draw upon money if something unexpected occurs. Safe investments can come in several formats like money market funds or certificates of deposit and they can keep your money safe under any circumstance.
In addition to low-risk investments in the stock market, you can always create more than one savings accounts with a bank or a building society to look after your money, it’s important to be conscious that banks can experience financial problems themselves but they have government backing and processes in place to secure your money if the bank experience problems. This can provide you with the confidence of always having money available when needed.
If you’re retired, then you should be prepared to have all your basic expenses covered which can make it easier to put some extra money aside for the unexpected. This method will not generate additional money but it will provide you will maximum control over your finances.
If you’ve not reached retirement, then maintaining a steady income via employment is a good way to ensure that all your basic necessities are covered and then have the ability to put money aside for emergencies. Even though you will not generate any additional income, it will provide the control and confidence that you have your finances in order.
Maintain borrowing options
Prior to retirement, borrowing options are more easily accessible than once in retirement, this is because you’ll have a steady income to justify the lending and repayments. It’s not advisable in tight financial periods to undertake long-term borrowing as you’ll commonly experience more interest and difficulty to clear the debt.
However, maintaining borrowing options is still a viable option for retirees, whereby the most common option is through equity release loans meaning that you use part of your property as collateral for the loan.
Collect money you’re owed
If an emergency has happened and you’re struggling for finances, then considering where you might be owed money can provide instant support. Checking whether family or friends have debts outstanding might not be the kindest request but important if you’re struggling yourself.
However, there are companies which can support you if feel you’re owed money from a business, especially PPI reclaims which expire on August 29th. These opportunities can provide a lifeline of help when you’re struggling following a financial emergency.
Be flexible with your spending
Match your spending to your financial situation meaning that if you’re struggling to stick to your annual budget because of a financial emergency, then restricting other expenses can keep you on track. This can be extremely important for retirees who do not have a consistent income to make up in future budgets. Unfortunately, this might mean sacrificing a specific aspect such as traveling or spoiling the grandchildren but it’s worthwhile if it keeps your financial security.
Relying on a single cash source to fund an emergency can be unwise dependent on the sum in the fund and whether more than one emergency happens. However, being financially prepared by creating several cash sources can be the solution to have the financial security to enjoy your lifestyle.
The key is to be over-prepared for the next financial emergency regardless of whether it’s an economic downturn or a home repair. Even though some emergencies are easier to be prepared for, it’s always advisable to have a good amount of cash behind you just in case the worst happens…