You could fear for your ability to earn a living for a number of reasons. It could be that you see people in your industry lose their jobs to redundancies and fear that you could be next, for instance. It doesn’t always take a direct threat to your job to lose the ability to bring home a paycheck. A serious illness or even something as common as a chronic backache can make holding down a regular job impossible. Life being as uncertain as it is, it’s the responsible thing to do, to take stock of your financial state and to plan against the possibility of not being able to support yourself one day.
Step one – assessing your financial position
If you don’t run your life to a strict budget, you need to get on the job immediately. Many people seriously underestimate the kind of money that their standard of living demands each month. To plan for the kind of savings that you need to set aside to support yourself in the event of a job loss or serious illness, you need to know how much you need to spend each month. Rather than use paper or a general-purpose tool like a spreadsheet, a dedicated online home budgeting tool like Mint can be a good idea.
Step two – identifying where to make potential cutbacks
The budget you prepare should list all your sources of income and account for all your expenses. When you have every expense that you make on a full list before you, you’ll be able to determine what money is wasted on and how to save on essentials to help divert more money to your savings.
Deciding which luxuries and other necessary expenses to cut back on is a personal decision. It’s far easier, though, to find ways to save on practically every essential – utility bills, groceries, insurance and so on.
The first step to saving money on any purchase or expense is to resolve to never buy anything without first shopping around. Looking for a better deal is easier today than ever before.
Energy, telephone and broadband contracts can be expensive. Finding deals that are even a fraction cheaper and switching to them can mean hundreds saved each year. Many well-respected online comparison shopping tools help you find better utility deals.
When it comes to shopping for a better energy contract for instance, comparison tools like www.ukpower.co.uk do an excellent job. You get to compare multiple energy providers in your area and narrow your choice down to the cheapest deal in minutes. It’s worth noting that with all these utilities, the best rates typically go to those who pay their bills by direct debit. When you set up a direct debit, it gives the energy provider confidence that you intend to pay all your bills in time. The reward is a discount on your bills.
Step three – eliminate waste
Cutting back on waste isn’t just about resolving to eat out or go shopping for clothes less often. It’s about studying every area of your budget and finding out where you don’t get the best value for your money.
. Make sure that you pay your bills on time. When you are late paying your bills, you end up losing money on penalties, interest and a drop in your credit score. You also lose out on the best deals when you need to take out a new credit card or car loan.
. Never pay interest on a credit card. Revolving balances and paying credit card interest can be a serious resource drain. If you pay interest on a card, consider applying for a 0% balance transfer card.
. Make sure that you use coupons to save money on daily needs.
. Understand how the insurance system works. You can save hundreds each year by reading up on ways to save on car insurance and home insurance. With car insurance, for instance, signing up for a telematics insurance policy can result in excellent savings.
Step four – put money away
When you begin to cut back on waste and unnecessary expenditure, you’ll have enough money to begin a job redundancy savings plan. Saving for redundancies or job losses, it’s good rule of thumb to save enough to get by on for a full year. You may need that long to find new employment.
Scott Byrom has a passion for personal financial health. He often blogs about ways in which consumers can reduce their domestic bills and save money.