How To Be Prepared For A Financial Emergency
And Unexpected Bills
Q: How should I prepare for a financial emergency?
A: If you don’t have enough savings to fall back on, you should take action now to protect yourself from an unexpected bill.
A third of us are living on the financial edge, with no savings whatsoever.
The three most common unexpected costs are: car repairs, medical bills and technology that needs urgent repair or replacement. Worryingly, many of us would either have to get into debt or increase our debt if we were hit by unexpected bills. Unless you can rely on family or friends, getting hold of cash fast will cost you. So, it’s better to be prepared.
Here are two ways to make sure you have money on hand for an emergency.
Save for a rainy day
The classic received wisdom is that you should have the equivalent of three months’ salary tucked away in case disaster strikes. To make that a bit more palatable, those of us without any savings should try to put aside at least €20 a week. That’s €1,040 a year. That could mean you need to give up your coffee shop trip on the way to work or cut back on a few pints or glasses of wine down the pub.
It’s a good idea to have a direct debit set up for the day after you get paid – this way it’s as if you never had that money in the first place and you won’t notice when it’s gone.
Once you have some savings building up, don’t just hide them in a coin jar or in a drawer – start earning interest on them. The best place to look for a decent rate right now, with instant access to your money, is a deposit or easy access savings account. There are some available that will give you access penalty-free to your money when required.
Contact a financial broker for the best interest rates available right now. Contact us for a free budgeting tool to help you see where you’re spending and look for things to cut back.
If you prefer good old pen and paper, write down everything you spend in a month, right down to the odd chocolate bar or newspaper. You will be surprised at how much you can save once you start this process. Even if €20 a week isn’t realistic, try to save what you can.
A contingency credit card
If you really can’t save up a decent emergency fund, then think about getting a credit card so you have something to use in emergencies. Remember, it is only to be used for an emergency.
If you have difficulty resisting the temptation to spend on a card or can’t clear the balance at the end of the month. Give it to a trusted family member or friend to keep hold of. Just be sure you can access it quickly in an emergency.
A good financial broker will offer savings and investment advice to suit your personal requirements, to include your individual circumstances, your age and risk profile. They should also provide a comprehensive ongoing review service