Planning and saving for unforeseen events can help you lead a hustle free life, instead of making you go through financial crisis every time your roof leaks, you fall sick or your housegirl leaves in the middle of the month.
It cans also help you cut down on your over-dependence on credit cards and soft loans. According to financial experts, people often get into debts for not saving even when everything is going on well for them. Create an emergency fund as a way of anticipating the many regular events that arise every so often with a little planning and saving, a broken car spring a high power bill of the family holiday do not have to result in financial emergencies. Such a fund can help you cope with both the expected and unexpected expenses. Here are some simple steps to help you get started on your emergency fund.
Identify your regular expenses
Take an inventory of those variable expenses that occur throughout the year. Such expenses include property, taxes, insurance premiums, holidays, car servicing and birthday’s expense and so on.
Write down anticipated amounts
In the case of anniversaries you will know when such expenses are due but in others, you may not know. However, you know that sooner or later your car will have problems or a home electrical appliance will reach its use by date. Try to anticipate these expenses and list them earlier than when they will actually come up. Keep updating your list, as you discover more probable expenses in the course of the year.
Save monthly for non-monthly expenses
If your car insurance is due in June, for example set aside a small amount starting in January. When June comes transfer the money to your current spending plan setting aside even a few hundred shillings each month for foreseeable expenses can make it easier to manage your money throughout the year. By doing this, you will be avoiding larger money woes ahead.
Reduce your monthly spending
By learning to track your expenses, you may discover areas where you can trim your monthly spending with some small sacrifices. Think of cutting costs in areas like your entertainment and visits to professional beauty therapy buying and reading Do-it-yourself books is the easiest way of cutting a lot of money that goes to repair men and a host of other experts. The important minimal threshold of three times your money income that financial experts advocate for.
Small amounts of savings add up quickly and start compounding immediately. One mistake that people make when trying to get their finances under control is not having a separate savings account. They often reason that it is better to put any extra money they earn towards reducing credit card or loan interest than depositing it in a low-interest regular savings account. The problem with this strategy is that if you don’t have some money set aside from your other operating accounts for paying unforeseen bills, you inevitably end up adding to your credit to top up loan account to cover for the difference.
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