These are the kinds of things you need to protect yourself against financially. That is why advisers and all of the big investors say that you need to set up a savings safety net to cover you for this period.
Start putting money into it
You are not alone. Most people wouldn’t cope for at least a month (if that) if they suddenly lost their income and several wouldn’t manage more than a week so take heart!
See below for a step-by-step explanation of how (and why) to perform this…
- Save money on bills and other spending
- Make extra money where you can and
- Throw what is left over into your savings account until you’ve reached your target.
- You set up a standing order from your existing account each month — as much as you can manage — to that savings account until you have enough.
- If you have no extra money each month, you find ways of making and saving money… difficult? No. This is exactly what this site is all about!
The money you save for your savings safety net needs to be placed into a high-interest savings account and left there. Have a look here for the best savings rates and open up the very best one you can find.
Investing is for the long-term and the best returns often come from products which go up and down a lot in the short-term (like the stock market). Long-term these investments do well, but in case you suddenly need to get hold of your money you could realize that your investment is at a low period so you won’t have as much as you thought you had.
How much money do you need to cope?
… unless you have an emergency. Really — do NOT touch this money at all unless you really, really have to. If I hear you taking some of that money out when there wasn’t a dire need I’ll come round your house and tell you off!
Add up that record (or just click ‘calculate’ if you’re using an internet budget calculator and there you have your monthly budget.
However, this situation cannot last. Everyone Should Have a ‘savings safety net’, whatever their income, and Now’s the time to create one. With a savings safety net you can laugh in the face of redundancy and sleep better at night. Here’s how you do it.
How long can you manage in the event you suddenly lost your supply of revenue? Six months? Six weeks? Six days? Can you just about manage from day to day?
If you Have worked out that it costs you #1,000 a month just to pay the bills then you should aim to put away between #3,000 — #6,000 in your savings account
This money is only to be deceived into if you lose your job or have some other event that stops you making money each month. It is your security savings net and it must stay intact until you want it.
You have to have your money in a nice, safe savings account for your emergency fund so you can get hold of it easily and you can know that your investment won’t suddenly tank just at the time you would like to get it. Choose an easy-access savings account here.
Now multiply this amount. Ideally you need to have at least three times that much in your savings safety net — in actuality, having six times that amount will be even better. But objective at least for three times that amount.
This is the amount you need to have to keep the roof over your mind and soul and body together.
How does your month cost?
Of course, savings rates often change so you should keep an eye on your account to be certain it’s the best one. Keep checking back after every 3 months or so to see if your account remains in the top few. If it’s dropped down then transfer your money to the current best buy.
- Ideally, do a budget and figure out how much you need each month to survive — i.e. pay the mortgage or rent, your family bills and basic food, travel and clothes for the month. Nothing fancy, just survival.
- Take that amount and multiply it by six. Could you put that money together over the next few months?
- if not, could you get together three months-worth?
- Establish a savings account (ideally an instant-access one so that you can find the money in an emergency)
- set up a standing order from your bank account to put money into this savings account each month until you have three or more months-worth of survival money.
- Also, if you have a lump of money somewhere, add that to the pot so you build it up fast
- don’t touch the money unless you have an emergency!
- Your Rent or Mortgage
- Your utility bills
- Basic clothes
- Extra for household expenses
Investors say it, by the way, because you need to have money you can access quickly and easily at any time rather than having to dip into your investments.
It doesn’t Need to be Precise — Only write a rough list of the expenses you have Every month including, for example:
Yeah right. Easy huh? Now there are two ways you can do this:
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Good, because this might hurt: you need to put away between three and six times the amount you need to keep yourself going for just one month.
Establish a savings account
Now, we’ve got a very extensive article here about how to save if you don’t have any money so take a look at what that says. Remember that the main ways to do this Would Be to: