It is imperative that you maintain a habit of stashing away a part of your earnings on a regular basis while you can for rainy days. When hard times hit you, your saved money will provide you with the much-needed support.
Importance of emergency fund
Not having an emergency fund in place will exacerbate your problems and will leave you in a state of despair. You cannot cut down on certain expenses related to things without which you cannot live.
You have to arrange money for essentials other bare minimum day-to-day expenses. Generally, most financial experts advise that one should make it a point to save money to create an emergency fund that can last for minimum three months.
Say, you are spending £700 per month. It means you will need at least £1000 to sail through tough times.
How to construct an emergency fund
Depending on your regular earnings, you should initiate the process of saving money by putting away whatever amount you can afford on a regular basis. Take a look at your budget and put a stop on unnecessary expenses.
This way you will get more small cash loans to save and your emergency fund will grow faster. However, make sure you do not have any debts to repay. Debts come with higher rates of interest compared to the interest you get on your savings.
Thus, it is prudent to first pay off the debts to get rid of those high interests and then start saving.
Doing more with savings
Savings are principally done for tackling unforeseen pecuniary crisis. Furthermore, when your targeted amount is in place, you should consider investing your surplus saving corpus.
There are various investing tools available in the financial market, which can give you higher returns and eventually, create wealth for you. Products like stocks and property are excellent options to invest.
If you do not want to take risk, then stocks or shares might not attract you because the appreciation in their value depends on volatile market trends.
There are other conservative investments options also where the returns may not be high but risk of losing on your principal invested amount is less.
It is therefore it is always suggested that a proper calculations and financial planning can help you stay away from financial problems.
