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How to prepare your finances for the unexpected in Hannon

How to prepare your finances for the unexpected in Hannon

The unexpected is usually exactly that, unexpected. So how can you prepare for something you don’t know is coming or in what form?

 

If the global pandemic has taught us anything it is that things can change fast. Those changes can also be serious. So how can we prepare for the next big event?

 

By being flexible and planning ahead.

 

Set a household budget with a surplus

 

Budgeting is at the core of financial success and it is one of the tools we can use to plan for the unexpected.

 

If you know exactly what you have coming in and going out each month, you will immediately know the impact of that unexpected event. If you can run a small surplus per month, you can use it for an emergency fund. We’ll get to that in a minute.

 

Budgeting doesn’t have to be complicated or too time consuming. A simple spreadsheet with your average monthly income and outgoings should suffice. It will show where you’re wasting money, where you could make savings and perhaps where you are overpaying for things.

 

It’s well worth doing even if you’re not planning for the unexpected.

 

Plan an emergency budget

 

An emergency budget is useful for if you lose your job or suffer a drop in income.

 

Now you have a basic household budget, look at every outgoing and mark each as either essential or optional. Mark each item as either something that has to be paid no matter what and other items as those that can be but in an emergency.

 

This provides an absolute minimum amount the household requires to function. This is the number you’ll need to keep in mind should that unexpected event happen.

 

Start an emergency fund

 

Once you know what you have coming in and going out, and hopefully have a surplus, you can begin an emergency fund. Set up a monthly payment into a separate account to make sure you don’t forget.

 

Make sure this is an account without access limits or notice so your money is available at a moment’s notice.

 

The ideal emergency fund would include 6 months or more of total household costs. Any more than that would be a bonus.

 

You don’t have to save everything. Set a comfortable amount each month and keep it going. Even $20-$50 per month will soon add up and will be ready to help should the unexpected happen.

 

Expand to long term savings

 

If you’re able, once you have 6 months in your emergency fund, you could open a long term or notice savings account to expand your plan further. As long as you still have your emergency fund, subsequent savings can go into longer term planning.

 

This could help with college fees, paying off the mortgage or something longer term. It could also be used for emergencies such as property repairs, medical bills or something else.

 

Notice accounts will usually make the funds available immediately for emergencies but you will lose any interest for that year. If it’s a real emergency, we don’t think you’ll mind about that!

 

We appreciate that not everyone is going to be able to save tens of thousands of dollars. You don’t need to. Just budget however you can and save whatever you can. Even a few hundred dollars in savings could make the difference in an emergency.

 

Get in touch with the car loan experts at Northway Ford for great deals on auto finance.

 

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