Managing your budget isn’t just about avoiding luxury expenses. It’s not about being frugal all the time and it’s certainly not about buying the cheapest thing you can to get by. In fact, the secret to managing money is actually mitigating financial disasters. By creating slack in your finances, you won’t feel the effect of large and sudden expenses as much. This means it won’t disrupt your life and it won’t affect your quality of life.
So in this article, let’s take a look at a couple of tips that can help you with large and sudden expenses.
1. Always have an emergency fund
Sounds like a basic tip, but always make sure that you have an emergency fund. The exact amount to save depends on your salary and what you can spare, but we suggest always taking a percentage of your salary and putting it aside. It can be as little as just 5% of your wages or even everything after you’ve paid your monthly expenses and budgeted for your shopping.
2. Sell things that you no longer need
We all tend to have a habit of buying and storing things that we don’t actually end up using. In cases like this, it’s important that you get rid of the clutter by selling it while it still has value. There can be exceptions to this, such as collector’s items that can build value over time. By focusing on reducing clutter and potentially making money from it, you can amass a larger pool of savings to help deal with financial emergencies.
3. Chase money you’re entitled to
If you’re entitled to money, be it some kind of benefits or compensation from work, always chase it and always hold on to it. If there’s money just waiting to be claimed, you should never leave it and ignore it. This could mean you build a personal injury case to help claim compensation, it could mean using up your holiday dates at work or it could mean asking a friend or family member for money that they owe you.
4. Look for aid or relief to help
Depending on what the large expense is, you might be able to seek some kind of relief to help you. For instance, if you’ve got a large medical expense that is difficult to pay for, you might be able to seek help from your insurance company.
5. Take out a loan
As a last resort, you can take out a loan. If there’s any good reason to take out a loan, it would be to manage a large and sudden expense. Even if you have the money available to pay for the expense, smoothing it out by paying it over a few weeks or months can help to stabilize your financial situation and reduce disruption.
As you can see, it’s not hard to cope with large and sudden expenses as long as you’re prepared for it. Again, the theme is creating slack in the system that can provide a bit of breathing room when you do need to use up your emergency funds.