Saving is really important, but most people don’t realize just how important it is until the time comes and they haven’t got anything saved. When financial emergencies arise, and they do, there is nothing worse than knowing that you aren’t covered. You need to take loans, borrow money, and hope for the best. It is actually a terrifying situation and can pile the stress on really quickly.
In fact, many financial emergencies are why many people end up in dangerously high debt and in some cases, financial ruin. For example, imagine you were in a car accident and unable to work? Aside from needing a settlement calculator, you’re going to need some cash to be a cushion until you are back on your feet.
These are the funds that you tuck safely away in an ISA or any other locked account. You need to be able to access these funds at a moments notice. Ideally, you will have at least 6 months worth of money in there that is free to use if anything should happen. So when you make the decision to save, this is where you want to start putting your money. You should set a budget to work out what you can safely put aside. It might mean that for a little while you’re going to have to make some cutbacks on what you buy and the entertainment options you have. But this is worth it. Where possible, create an automatic savings plan, so that the heavy lifting is out of your hands.
“Do not save what is left after spending; instead spend what is left after saving.”
― Warren Buffett
So many people skip this thinking that it won’t matter if they have it or not. Assuming that they have time to arrange it all. But the truth is none of us know when that time will be up. And if you already have dependents, or you are planning to in the future, then they will need financial security. If you have a house that is currently being paid off via a mortgage, then you are seriously going to want to think about what will happen if you can no longer make those payments.
Long-term Disability Insurance
If something happens and you aren’t able to make a regular income any more due to injury, then you’re going to be very happy that you have this. The safety net isn’t there for fun, it’s there for the what-ifs. Many people think this coverage is a luxury, but it should be considered a necessity if you have housing repayments, children, a significant other, and of course, medical bills stack up thick and fast.
You should sit down and work out how much you will need to put into your pension from the age you are now, to the age you want to retire – and see if it is going to be possible. Where possible, take advantage of any government schemes to match what you are putting into your own pension pot. You’ll also do well to take out other long-term savings that can be accessed after a period of years. Keep rolling that cash up, and cash outcome retirement time. The fact is that most people can no longer finish as early in life as the once could, and retirement really needs a lot of consideration.
A general savings pot for rainy days is undoubtedly something you’ll want to do too. You don’t need to put a lot of money into this. Instead, you are going to be looking to skim off the top of what you are spending elsewhere. There are many apps that will now do this for you, and they have a low yearly charge to do so. There are some that will also automatically calculate what you can afford to save and put it into a savings pot for you.
Even a penny jar emptied once a year and put into an account over the space of a few years will give you a little bump.
Your financial safety plan has more to do with the people you love and want to look after than it does with you. But, that safety net will be the thing that keeps a roof over their heads and food in their bellies when it really counts. So if you aren’t saving and you don’t have those vital insurances – make those changes today, you never know when you’ll need them.