Finance and Entrepreneurship

Cost of living: How to Build your Financial Resilience

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We ask the experts for the best ways to get ready for a financially uncertain year, from making sure your loved ones are covered by insurance against unexpected shocks to earning interest on both savings and current account balances.

Many of us are being put to the absolute limit by the cost-of-living crisis. It is more difficult than ever to stretch our money until the next pay period because household expenses are increasing while wages are not keeping up.

Rising inflation can affect our ability to manage any sudden financial shocks that life may throw our way, in addition to making daily living more challenging.

Unless you have savings or insurance in place to help, a sudden blow can throw finances off course and cause a downward spiral, whether it’s the car breaking down, an unanticipated illness, or job insecurity.

This implies that people’s lives are severely impacted by money worries when times are difficult.

You can survive challenging times in the upcoming year by concentrating on strengthening the financial resilience of your family. Here are a few techniques.

Start with an emergency fund

By saving money for “rainy days,” you reduce your risk of incurring debt in the event of an emergency. It’s recommended by experts to have six months’ worth of expenses in easy-access savings, but if that seems like a lofty goal, it’s best to concentrate only on what’s feasible.

A good way to accumulate these funds is through regular savings accounts. These kinds of accounts, which are frequently linked to your current account, are made for people who want to save a small sum of money each month and get good rates in return.

You can make sure you are accumulating a separate savings fund without even realizing it by setting up a monthly direct debit into a standard savings account.

Make a contract diary

Making plans now to reduce bills wherever possible will help you maintain your financial stability. Paying too much for your household bills will weaken it. Even with rising inflation, you might be able to save money on your mobile phone and broadband bills, especially if you’re open to switching to a SIM-only plan for your phone.

“Confirm the expiration dates of your mobile phone and household bill contracts. When the contracts expire, set a reminder for yourself to check the new deals that are available so you can switch to the best one. 

Consider insurance cover

Although paying for insurance can be annoying, especially when money is tight, insurance can protect you from unforeseen events that could otherwise throw your finances off course.

Considerable coverage options include life insurance and critical illness insurance, which can support your family should you pass away or pay out if you become ill. Since some people already have life insurance through their jobs or other arrangements that could assist with unforeseen expenses, not everyone needs this coverage.

In some cases, people receive life insurance from their employer, but they might not be sure if it’s adequate. It may be worthwhile to think about getting an insurance policy if you have dependents or anyone who depends on you financially, she says. It will give you peace of mind.

Budget for wants as well as needs

Making your budget sustainable is essential if you want to be financially resilient because it means making long-term plans.

“Be sure to include spending money on your favorite things in your budget. You’ll remain motivated as a result. It’s not a good idea to rely solely on willpower, she says. “Spending money on yourself is not a sin.”

Take control of your mortgage

Many of us will see an increase in our monthly mortgage payments when our current agreements expire due to higher interest rates. Most of us have a sizable mortgage payment, so if this expense increases significantly, it can have a significant impact on our resilience.

If you want to find the best product for your risk profile, you might want to speak with a mortgage broker.

While it is possible to lock in a new deal up to six months in advance, given the current state of affairs, doing so may not be the best course of action. Instead, make a review call to your broker to discuss your options.

Put these safety measures in place now, at the beginning of the year, and you will be ahead of the game, regardless of your personal financial situation.


ALSO READ: How to Set Up Your Personal Finances Right and Survive Inflation

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