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Money can be a headache even at the best of times, and we’re all at the mercy of the unexpected. We don’t know what the future holds, so it pays – literally - to plan ahead. Together with our friends at Eleos Insurance, we’ve got five of the best ways to prepare for the unexpected.
This is a good place to start. In our increasingly cashless society, it can be easy to spend more than you intend, so always make sure you know how much is coming in and how much is going out.
First, list all of your essential fixed costs, such as mortgage or rent payments, energy and water bills, council tax and insurance. There’s not much you can do to reduce these - with the possible exception of your energy bills - so, if you want to increase your disposable income, look at ways to cut back on your variables. These are things like food (we mean those takeaways, not your weekly shop) and clothing, for example. Budget supermarkets are on the rise in the UK and are worth trying if you haven’t already. According to Which?*, there’s a 28% difference in the cost of a weekly shop between the most expensive and the cheapest supermarket in the UK. Simple things like meal planning, bringing a shopping list with you and avoiding buy one get one free (BOGOF) deals can also help to keep food costs down.
When it comes to buying clothes, higher quality items tend to last longer, but are often more expensive. If it's possible to save for what you want, you could get years out of it rather than multiple fast fashion pieces that are likely to be less durable. Always check for voucher codes online before paying, or see if you can get any cashback on your purchase. Consider pre-loved clothing, too - you can often find good quality items from places like Vinted and charity shops for a fraction of the retail price.
Finally, don’t be afraid to ask for help. As well as seeing what government benefits and allowances you may be entitled to, you can also talk to money and debt management charities, or check the government website for free advice on how to get your finances under control.
It's always a good idea to create your own financial buffer against unforeseen events. You’ll need a consistent source of income, a savings account to add spare money to and the discipline to maintain it. So, how does an emergency fund work? Unlike traditional savings, which can help with future purchases or even towards retirement, an emergency fund is a financial safety net that ensures you’re covered for any unexpected financial emergencies. For example, if your washing machine stops working, having an emergency fund as your first line of defence means you won’t need to dip into your honeymoon fund or holiday savings. It’s a buffer that protects your long-term money goals.
There’s a well known formula for managing money called the 50-30-20 rule, which advises you to spend: - 50% of your income on things you need - housing, food, clothes and bills etc - 30% on things you want, like takeaways, concert tickets and jewellery - 20% for savings - this is where your emergency fund comes from Of course, not everyone can manage to save 20% of their income, but the important thing is to work out how much you can spare, put it away - and keep adding to it at the same rate. Then, if you suddenly need to replace your washing machine, you’ve got it covered.
If someone asked you to list your most valuable assets, would you mention your income? It's an often overlooked but crucial means for us to get by. Yet, with just one stroke of bad luck, we’re at risk of losing this crucial resource. For a lot of us, our income isn’t just a paycheck - it's our financial stability and source of future possibilities. That's why insuring it could be a wise thing to do. Just as we insure our mobile phones and laptops, insuring our income means if we were to stop working due to a mental or physical illness or injury, we’d have confidence knowing that this type of insurance can cover our bills and expenses. Income protection insurance must be taken out when you are healthy and employed, and if you were to stop working due to illness or injury, you would receive regular monthly payments to replace the income you might lose.
Insurance can feel like a dull measure, but income protection can be a very cost-effective way of creating financial stability, with policies starting at just a few pounds a month. It’s a price worth considering for security and peace of mind.
You might not see a connection with your financial wellbeing, but your physical and mental health can have a serious impact on your finances.
Being fit and free from health issues or worries means you’re much more capable of making sound financial decisions. Not only that, but poor health can be a major cause of lost income. While insurance can prepare you for the effects of long-term sick leave, prevention - by looking after yourself - is definitely a stronger option.
We've said it before and we'll say it again - ask for help if you're struggling with your finances. Confide in an understanding friend or family member if you feel comfortable to do so, or reach out to specialist organisations like Money Helper and Step Change for advice and guidance with no judgement.
Last on the list, but still important, is saving for future events like birthdays, holidays and Christmas. We know the festive season comes around the same time each year, but somehow a lot of us are still broke come January. By planning ahead for those calendar events that add pressure to your finances, you can help ease the strain on your pocket - and your mind. How? Well, having funds set aside for specific occasions means you may be less likely to dip into your savings, run up credit cards or spend your entire paychecks on gifts. It’s never too soon to start saving - your purse and mental health will thank you for it.
Eleos is a UK-based insurance company and makes it easy to get income protection insurance online in minutes - without speaking to anyone over the phone. Eleos also provides free extras with different policies, such as easy access to GPs and gym discounts. Check out your quote to see what free perks come with your policy.
Don't forget, as a Creditspring member, you can access our Benefits Finder tool to help you unlock up to £923 per month** in untapped allowances.
*Research conducted in June 2024 by Which?
**Figure based on 63,113 people who used Benefits Finder between 22nd September 2022 and 2nd June 2024.
