How Can You Be Prepared For A Financial Emergency?

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Published on Wednesday, 02 October 2019 10:24

Last Updated on 02 October 2019

Monica Costa

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Maintaining healthy finances is crucial, but when faced with a financial emergency it can be difficult to change. However, it is not impossible as you can begin to save money with just a few simple changes. In this article, I am looking into how we can prepare ourselves for a financial emergency – just in case…

Start An Emergency Fund

Managing your finances can be difficult and with 15% of Brits having no savings at all, starting an emergency fund could the first step when preparing in case of a financial emergency. By setting aside a portion of your paycheck every month, you can begin to build a lump sum in savings in case of a financial emergency to help you maintain financial stability whilst you resolve the situation.

Create A Budget

When creating a budget, it is important to begin by looking at your monthly income. By looking into the income that you make per month you can then ensure that you are spending less than you earn. If you find that you are then spending more than you earn, it is crucial to monitor spending habits to bring this down on a monthly basis. With the weekly household expenditure totalled at £572.60  in the UK at the end of the 2018 financial year.

Utilise Open Banking

In 2016 the Competition and Market Authority (CMA) published a report with the findings that larger banks were not having to compete for customers. This then led to smaller banks finding it difficult to grow and access the market preventing the industry from expanding. As a result of this, the Open Banking Implementation Entity was set up by the CMA in 2016 to deliver open banking that works for all as well as delivering on the following objectives.

• Design specifications for the Application Programme Interfaces
• Support regulated third party providers
• Create security and messaging standard
• Manage the open banking directory
• Provide guidelines for participants in the Open Banking ecosystem
• Set out the process for managing disputes and complaints

 

Though it can take time to develop an understanding of open banking, these new set of rules are encouraging the nine major banks to offer individuals a secure method of sharing their personal financial data and transactional information with a third-party source. An example of this is money apps such as Money Dashboard, Oval Money and Yolt that all provide you with the means to connect a bank account and track spending habits. Though this is completely down to you to monitor your finances, these financial apps can help to maintain a healthy budget.

Cut Monthly Spending

Due to the weekly spending amount slowly beginning to rise, it is important to be on track with spending and cut back when you can. Whether you decide to avoid spending money on unneeded items such as electronics or switching supermarket to reduce the cost of your weekly food bill it will all help to reduce your monthly spending substantially.  With the supermarket, Aldi found to be 20% cheaper than other leading supermarkets. This small change can generate an average saving of £9.79 compared to other rivals. This is beneficial when looking to prepare for a financial emergency as this money can be placed into an emergency bank account to ensure you have the funds needed to aid you should a time of financial difficulty occur.

Regardless of the steps you put into place, there are a number of ways that you can begin to prepare for a financial emergency and maintain healthy finances.