What to do when an unexpected expense comes along
Unexpected expenses, or unforeseen changes in circumstance can put a large amount of pressure on everyone, especially when they come out of the blue. Our team are all too aware that sometimes, life happens and it can put you in a position where you have to take on debts just to keep your head above water. Even our national financial regulator admits that sometimes life catches us unawares. This not only puts on additional financial pressure, but also mental and emotional pressure, something we’ve talked about at TWiCE before. How can you steady the ship and manage an unexpected financial challenge?
A big part of being able to manage that challenge is having things in place to cushion you against any financial blows. Using credit or taking on loans to cover unexpected expenses should only be a last resort. One of the best options is to start building a safety net to catch you if you get caught out. There are a couple of different ways to go about building up an decent safety net. The first is to do an income minus expenses assessment to figure out how much you have left over after each pay.
The amount you then have there can be divided up to suit your needs. If you’re saving up for something, a new purchase or holiday for example, you should consider that as separate to your emergency fund savings/unexpected expenses savings. You could consider having some savings aside that you put into each pay. From there you can begin to build a safety net to help soften the blow should an unexpected expense or life event come into play. It’s all well and good to start building up that savings account, but how much should you save before you can consider yourself relatively comfortable? At least a minimum of 3 months worth of income is generally considered to be sufficient to get you through a short term rocking of the boat, but to have more couldn’t hurt.
While squirreling away whatever possible can put you in a better financial situation sooner, at TWiCE we understand there still needs to be a balance with quality of life. Saving everything you can at all costs might be needed in some instances, but at the end of the day, depriving yourself and not practicing good self-care can often end up being a net-negative for you personally. The unexpected expense or change in circumstances is often a significant source of stress itself; not practicing healthy self-care would only compound the issue.
That’s why at TWiCE, we like to take a different approach to helping to create a savings culture. Our goal is to help everyone build themselves up both in terms of their finances, but also their knowledge and skill set to deal with everything that life can throw at you. If you’re keen to find out more about how we go about setting people up for success, give us a look here.
- Tom L
Disclaimer: The above information does not replace financial advice. Please ensure you seek independent financial advice before making any decisions regarding your finances. We also recommend that you carry out your own research to ensure that this is right for your own unique circumstances. Please note that we sometimes link to other websites but we cannot be held responsible for their content.