Life is an adventure filled with ups and downs. Whilst we hope most of these surprises are positive, there are some instances in life that come with a hefty price tag.
Whether it's a car breakdown, a pet emergency, or a sudden job loss, unexpected expenses can shatter your financial health.
How you respond in these situations will largely be due to your financial resilience. Now for those wondering, “What is financial resilience?” Let us give you a quick summary.
Financial resilience refers to your ability to withstand various life events that affect your financial resources. By building financial resilience, you can not only deal with unexpected expenses head-first but also work your way towards financial freedom. This allows you to protect you and your family from the uncertainty of life.
That’s why, to help you begin your journey towards a secure financial future, we bring you the top tips to plan for unexpected expenses. Now let us look into how these tips can help you create a strong financial foundation and achieve peace of mind.
1. Create a Nest Egg
No matter who you go to for advice regarding your plan for unexpected expenses, the first thing you will be told is to create a nest egg. As an essential aspect of any financial plan, emergency funds are created by individuals and businesses alike.
These funds work as a separate account that you can dip into in times of uncertainty when you are faced with unexpected expenses. Ideally advised to consist of approximately 3 to 6 months’ worth of living expenses, an emergency fund is your safety net in hard times.
The best way to achieve this is by setting aside a small amount of your income each month over a period of time. By slowly increasing your savings, you can rest assured that you have something to lean back on.
2. Assess Your Insurance Coverage
Whilst some types of insurance such as car insurance are a legal necessity, not having appropriate insurance coverage in other areas of your life can be terrible for your financial health.
Whilst not essential, ensuring you have home, property or pet insurance is a great contributor to building financial resilience. That is, having the right cover in case of a burglary or pet emergency is vital. That’s why, it is always a good idea to look into your insurance policies and make sure you’re fully covered
3. Creating a Budget: Identifying Wants and Needs
When dealing with unexpected expenses, you need to prioritise your spending to make the most out of your financial situation. In such cases creating a budget can help you deal with current expenses whilst also saving for the future.
A great way to do this is by identifying your wants and needs and, where you’re able, cutting back on the wants.
First, you need to take a look at all your essentials, like rent, utilities, groceries and other necessities. Set aside some money for these expenses and take a look at your discretionary spending. Here you can find ways to cut back and use the sum for dealing with unexpected expenses.
4. Diversify Your Income
Finally, to become more financially resistant, it’s rarely a bad move to diversify your sources of income. This could be as simple as earning a little extra spending money on the side, to an ambitious project, starting you down the path to financial freedom and early retirement.
By working on a side hustle using your skills or renting out your assets you can create passive income sources on the side. These streams of revenue can help you build financial resilience and strengthen your future.
Choose Salad Money for Fair and Affordable Emergency Loans
Building financial resilience takes time and effort. However, while the process may seem overwhelming, it is an investment into a better future for yourself and your loved ones.
Protecting you from financial setbacks and unexpected expenses, these strategies can help you make the most of your life goals.
However, if you still find yourself stuck in a financial rut or dealing with sudden unexpected expenses with nowhere to turn, you can rest assured that Salad Money is here to help.
With our More Than Your Score loans specially designed to help private and public employees stuck in an emergency, we’ve got you covered. What’s more, at Salad Money, we recognise that the traditional credit score system can be unfair at times.
That’s why, with our open banking based assessment system, we can offer you the support you need regardless of your credit score.