An unprecedented emergency can put your finances to test. Is your financial strategy strong enough to deal with such a situation? Let’s take a deeper look into planning a reliable financial blueprint, to strengthen our financial resilience.⭐Financial Tips ⭐ Personal Finance
The year 2020 has turned Britain into a nation of savers. The onset of the Coronavirus Pandemic forced us to take a deeper look into how robust our financial strategy really is. Savings are a key component in money management, and yet, over 40% of the Brits don’t have sufficient savings to last them for a month with no income. Where almost 1 in every 3 people has savings of less than £1500, there are 9.05% who’ve got no savings at all. Most of us normally overlook the importance of planning a financial strategy ahead of time. But the alarming aftermath of Covid-19 is a wakeup call, urging us to realise the gravity of the situation.
Emergencies are sudden by nature, but that shouldn’t deter you from tackling them, head-on. With a strong and efficient financial strategy and informed decision-making, you can prepare yourself better to hustle through any crisis.
To help you strengthen your financial resilience, we’ve done some research and come up with some tips that can help you plan better.
1. Start by creating an emergency fund
If you’ve not saved up an emergency fund yet, it’s not too late. Start by saving small amounts, perhaps £200 every month or £50 week and watch your fund grow. You can also set up automatic savings from your monthly income, to set aside at least 2% for the fund. Deep dive into your budget and see what you can do to shore up more money in your emergency fund. Considering the current circumstances, where over 6 million people experienced an income shock, savings are imperative to weather this crisis. Once you set up an emergency fund, you’ll at least have the worst-case scenario covered.
2. Shield your credit score from damage
Your credit report is the determining factor of your eligibility for loans and credit. If you often rely on credit cards to bridge some financial gaps, make sure to keep up with repayments. Even if you can’t make payments in full, agree to a plan with your creditor and make at least the minimum payment to reduce the balance. Once you’re in a position to repay, start making regular payments, as agreed with your creditor so that your credit score jumps back to normal.
3. Look for any employment benefits
Give your employment contract a thorough read and find any employee benefits, such as sick pay, that cover some costs. Some employers cover up to 3 months of sick leaves for their employees. If you happen to benefit from this, use these earnings to build yourself an emergency pot, to last you for at least 6 to 9 months.
4. Keep a room for emergencies in your budget
Once you’re a little more financially stable, create a budget with some room. Normally, financial resilience can help you get through in times of crisis. But leaving some room in your budget will help you get through your day to day struggles, without having a major impact on your overall savings. For instance, if your weekly budget allows you to spend £100, but your expenditure is £75, you’ll be left with £25, which could keep you covered during an unforeseen crisis.
5. Think about financial resilience on a personal level
Make a list of things you can do, on a personal level, to make yourself more financially resilient. Decouple your funds from your spouse/partner and gauge your resilience to get a better idea. Do you have enough to survive through a crisis? Do you have a separate savings pot and a retirement plan of your own? Finding answers to these questions will help you get an idea about where you stand currently when it comes to financial planning.
While you put in efforts to improve your financial resilience, here are some measures, we think can be taken, help people understand how to make better financial decisions:
- Creating more options for people falling in the lower income bracket, to make their savings account more flexible, with a reduced fee.
- Encouraging sustainable growth of Credit Unions, so that they can offer increased support to communities through new and innovative financial products, and push them to save
- Motivating people to see saving money in a positive light
- Imparting basic targeted financial education to people and communities to help them understand the significance of saving money
- Creating awareness about how people can start saving money without compromising their current consumption pattern
- Introducing automatic deduction so that a small sum of money automatically gets transferred to people’s savings pot every month.
- Encouraging automatic enrolment of people into payroll, loan management and debt management schemes
- Urging people to keep welfare benefits separate from their savings
The Coronavirus pandemic has certainly brought an air of change. People who formerly ignored the importance of saving, have now shifted their attitude towards the idea. This will bring about a change in the overall saving pattern in the UK. We encourage people to start looking at the bigger picture, and make small sacrifices in their usual spending patterns, to build up a sturdy fund to fall back on.
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