Financial security feels like something of a luxury at present, with a cost-of-living crisis threatening to enter its third year. As still-high inflation continues to affect the affordability of everyday life for the average family, more of us are growing keen on taking more direct control of our financial situation. But how can we become financially secure in such difficult times?
Create a Budget
Financial security comes from financial literacy, which itself can be a difficult skill to adopt. Part and parcel of this is learning how to budget effectively – that is, to make shrewd expenditure decisions that maximise ‘spare’ income each month. But in order to create the best possible budget plan for your financial situation, you first need to properly understand it.
This means creating an Excel spreadsheet that tracks your income and expenditure month by month and using it to figure out how much you have left over each month. Doing this involves tracking less-regular costs such as groceries, as well as listing regular costs like water, energy, and subscriptions. This comprehensive list can give you some strong ideas for where to start cutting costs.
Build an Emergency Fund
You might at first think of saving towards long-term goals, whether homeownership or family planning costs. However, financial security doesn’t start here, and even a light financial predicament could undo a lot of your hard work. Before anything else, you should put your savings towards an emergency fund – amounting to around three months of your household’s take-home pay. This can be used to cover emergencies and unexpected costs, as a buffer for your longer-term finances.
However, there may be a spanner in the works when it comes to your emergency fund: debt. Being in debt can be an expensive thing, beyond the value of the debt itself. This is because interest rates add to your debt over time, and more than counteract any positive interest impacts on savings. Put simply, attempting to save while in debt is like pouring water into a leaky receptacle.
To this end, repayment of your debts should take absolute and immediate priority. If you have multiple debts in different places, it can be difficult to figure out how to split repayments. This can be solved by consolidating them through using a loan; all debts are paid by the loan and your obligation is simplified to a single debt at a single rate of interest. When this is paid off completely, you can save more efficiently.
Between the above tips, you have all of the tips necessary to carry on your financial journey. Your newfound budgeting savvy can lead you to shrewd decisions regarding your spending, while your emergency fund saving skills will lend themselves well to building a long-term savings plan. If your situation is still confusing to you, professional advice would certainly not go amiss – but following these simple pieces of advice can go an extremely long way to building your financial security.
The Urban Woman Magazine Editorial Team is made up of seasoned writers and editors who have a keen eye for detail and a passion for all things urban. We strive to create fresh, original content that appeals to the modern woman. Our mission is to provide a platform for women to share their stories, experiences and opinions on various issues affecting their lives.