New Year is traditionally the season of fresh starts and personal resolutions. Along with diet and exercise, getting ahead financially is often what many aim to do.
While setting goals is an important element in your overall financial plan, so is having a financial safety net. Whether you are aiming to save more, spend less or reduce debt this year, your best-laid plans could fall in a heap if you are not prepared for financial setbacks or unanticipated costs.
Putting a financial safety net in place does not come down to any single measure. Rather, it is a comprehensive approach to risk that’s designed to protect you and your family’s financial wellbeing, come what may.
The first line of financial defence for households is to have some money tucked away in a ‘rainy day’ fund for emergencies and unexpected costs. If you are living from one pay day to the next and your hot water heater bursts or your car needs urgent repairs, the temptation is to borrow money.
It is also a good idea to keep your emergency cash in a separate account where it is readily accessible but will not get mixed up with your everyday money.
Most experts suggest you aim to put aside three to six months’ living expenses. This can take a while to build up so one time-honoured strategy is to ‘pay yourself first’. Set up a direct debit from your primary bank account to divert part of your salary each month to your emergency fund.
If you would like to discuss any aspect of your financial safety net, please give us a call.