I’ve only just been paid and my car has already cost me over £400 to have some repairs carried out and typically it comes at a time when I also have to pay for my MOT and road tax.
All in my car will cost me over £600 this month and that isn’t even taking into account any potential issues that they garage might find when I take it in for its MOT.
Luckily I have some savings that will cover this cost, but as my wife and I have taken a drop in our household income any unforeseen expenditure is only going to serve to decrease these savings further.
I’ve read many posts about how to save an emergency fund and can see the advantages of having money set aside for the unexpected obstacles that fall at our feet which have the potential to put us in financial dire straits.
Unfortunately being able to save an emergency fund isn’t something that everyone can do and I know that I’m in a privileged position to have one, the problem is with increasing rents and stagnating wages a lot of people are living hand to mouth and because of this, any issue could be potentially financially disastrous.
Do you really need an emergency fund?
It’s easy to get sucked into the belief that nothing is going to go wrong, but in the real world, it will at some point or another.
An emergency fund will act as that buffer between you being able to get an item fixed, having to buy new or taking any other action that you wish you hadn’t had to.
My car is one such example, I’ve had years of trouble free motoring and never really thought about having to put money aside to pay for the unknowns.
Something that I’d be kicking myself for and probably would have had a few sleepless nights over if I hadn’t any savings available.
How much are you going to need?
This will depend on you.
The Money Advice Service recommends that you have at least three months worth of essential outgoings in an instant access account for an emergency, with any more than six being a missed opportunity to earn some interest if any of us can remember what that is.
Prioritise what an emergency actually is?
We are always going to be tempted to treat ourselves, especially when we know that there is money being put to one side, but you have to remember that this money is strictly for emergencies.
No one will ever agree as to what makes up an emergency but I would question anyone that that would suggest that buying the latest gadget, going on holiday or having a blow out at the weekend because you’ve had a bad week is going to serve you well.
When the time comes, and it will, when you need that money to get someone in to look at your oven or make repairs on your car, nothing can beat the feeling that you have an emergency fund to soften the blow.
How are you going to save into an emergency fund?
1. Put some aside every month
Wow, put some money aside every week or month. It’s that easy.
I’m under no illusion that is what many would like to do but unfortunately, this isn’t always possible.
Putting something aside no matter how little is going to help and don’t forget that you can surprise yourself how much a jar of pennies or silvers can actually be worth.
2. Review your outgoings
You might not like what I’m going to say next……….you are going to have to make some sacrifices.
Whether it’s your subscription to Netflix, NowTV or stopping smoking or drinking, something has to give and the short-term pain you might feel when having to give up something you love is nothing compared to the feeling of having to put yourself at the mercy of a lending institution to get you through the month.
3. Get rid of what you don’t need
My wife has the selling bug and will be on the lookout constantly for things that she might be able to sell to earn a little extra income.
4. Rent out what might be useful to others
5. Increase your income
We all have the ability to offer something useful to someone else and it doesn’t have to be too labour intensive.
If you like animals and walking, why not become a dog walker. If you’re handy with a screwdriver and an allen key there are going to be people that have bought some flat pack that they have no inclination to put it up.
Sit down and review what you can offer, you might be shocked how much others are making from what you thought was a skill that wouldn’t be in demand.
Do you have an emergency fund?
Not everyone is going to feel like they need an emergency fund.
If you don’t have one, what’s your reason? and if you do, has it changed the way that you think about money or has it given you that piece of mind that you hope it would do?