Your 5 Step Financial Health Check
Many of us have faced financial challenges over the past year and as a result some may have asked themselves “how could I have better prepared for a financial emergency?”
Here are five easy steps to help take control of your finances and prepare for an emergency:
1. Create a budget and identify any potential cash flow issues
One of the first steps you should take is to determine whether you can meet your current and future financial commitments. A good way to do this is to prepare a budget including all your expected income and expenses. Include regular and irregular costs such as insurances, electricity etc for each period, so you know whether you’ll have enough income to cover your expenses when they are due. Your completed budget will show whether you are in surplus (your income is greater than your expenses) or deficit for each period.
2. Build an emergency fund
Setting aside some money in the form of an ‘emergency fund’ (usually in a separate bank account) will help to cover the costs of any unexpected expenses. Your washing machine or refrigerator may break down or you may experience mechanical issues with your car. Having some ‘rainy day’ or emergency savings means you won’t need to access your everyday funds needed for your budgeted expenses. Use your budget to determine how much you could deposit into an emergency fund and when.
3. Protect your assets
It is important to have sufficient insurance cover to avoid financial stress due to emergencies or unexpected events. Consider insurance cover for your home and contents, health, car, property investments and yourself – via income protection and life insurance.
4. Keep your debt under control
If you use credit (or take on other debt) to tackle financial emergencies, it can become challenging to repay the debt AND continue to cover the costs of everyday living and expenses. Credit card and other forms of debt usually involve high interest rates which could make the situation worse.
5. Plan for the future
If you are experiencing short-term cash flow issues it can be difficult to keep a long-term view, but it is important to always keep a degree of focus on growing your savings and assets for the future. Whether it might be for education costs, family celebrations, upgrading, renovations or your retirement, is it important to focus on the short AND the long term.
We have many tools, techniques and strategies to help you through your financial challenges and reach your goals. Call us today for a confidential discussion.