Having enough money in your savings for a rainy day is something of a coup. The bare minimum amount required for a safety net is three months’ worth of your pay so as not to struggle to get by when you are in a tight spot. People bend over backwards to salt away, and yet they find themselves running out of money.
A little or no savings at all should set off alarm bells because it will push you on the verge of borrowing money. Though loans like Provident with no credit check have been designed to help tide you over, there is always a great risk of falling into an abyss of debt. A lot of people, according to a survey, are in the red because they rely on small loans to fund their expenses during unpleasant scenarios.
Some reports have revealed that people fail to have even less than £500 in their emergency corpus. Ideally, it should be double this amount. You may have not realised it but, beyond a shadow of a doubt, your financial struggles are in the face of your habits of flinching from budgeting.
Believe it or not, budgeting paves the way for tracking expenses, which is a must to get wise to your spending behaviour. Only if you gain insight into your outgoings will you be able to make the right strategies to save money.
Here are some effective techniques to help you create an emergency cushion worth £1000:
- Set your target
£1,000 is not a small amount of money. You may need a few months to hit your target. Instead of being overwhelmed by a large figure, you should set your target in smaller chunks. Aim at stashing away a fixed sum of money every month.
Set aside money for fixed expenses as soon as you receive your pay, including the down payment for a business car loan or a mortgage. Now you know how much you are left with to pay for your utilities, groceries, commute, and entertainment.
Track by going over the bank statement of the previous six months how much you spent on variable expenses to suss out how much you can save out of your monthly income.
- Slash your expenses
A budget’s aim is to enable you to slash your frivolous purchases. The reason why financial experts suggest keeping an eye on your expenses is to know where you are spending more than you should. Note down each expense in your diary; in fact, the tiny one too. Having all expenses in one place will help you to be wiser about your spending behaviour.
Identify what prompted you to overspend. You might be in a bad mood the other day, or you got carried away while enjoying rounds in the bar with your friends. Experts say that knowing the triggers can help you make a strategy to deal with them.
You want to speed up your savings and keep entertainment or other discretionary expenses as little as possible. However, it does not insinuate that you should bash yourself when things do not work out. Figure out a way to be in the saddle.
- Leverage the power of automation
You may be hiding money in every corner of your house to keep it out of sight, but no matter how hard you try, you will end up dipping into those funds. You should rather open a savings account and use an automated transfer facility, so every month, a set limit is withdrawn from your pay account.
This emergency fund should be maintained separately from savings for planned goals. Mixing both accounts will obstruct your savings plans for a car or a house.
- Sell old objects
Look around, and you may find a couple of objects that may have seen “better days”. Instead of letting them be, you should sell them on eBay to get a good price.
Upload high-definition images of items to be sold. Write a clear description and then see all reactions coming in. Make sure you set the pricing carefully. People will negotiate if they are willing to buy them.
- Earn extra money
After analysing your income and expenses, you can easily determine whether you can achieve the target of saving £1,000 within a few months. To speed up your savings, you should start looking for ways to make extra cash. A side gig can come in handy, like babysitting, walking a dog, etc.
Various freelance sites can also help you get some work in your field. If you have some knowledge about any other fields, go for it. Whatever money you earn from your side gig should go directly to your savings account. Do not sip into it to meet your monthly expenses.
- Continue to save
Saving £1,000 is not an overnight process. You will have to stick to your habit of saving money. Chances are you come across some extra expenses in a particular month. It will hold you back from stashing away the set limit. Do not worry because you can adjust your budget the next month.
It is not easy to stick to your habit, especially when expenses for two different months cannot be the same. When you start losing patience, remind yourself that this is how budgeting works. It is normal, and you should not overthink it. Just ensure you are doing your job the best way you can.
To wrap up
You might feel overwhelmed to save £1,000, but it is crucial to have some savings. Although lenders can bail you out when you are in a tight spot, borrowing is not always a good option. Debt will have a bad impact on your budget because of interest rates.
Set a monthly limit for your emergency cushion and stick to it. Keep fine-tuning your budget when expenses go up and down.
