Financial emergencies do not give adequate warning before they arrive. However, they have to be tackled in the right manner for you to succeed at getting everything back on track without hindering the long-term interests of your family. How can you do this? There are several ways and means that you can consider in this regard:
- Choose more liquid investments- You should try to lock-in savings for retirement for a long period of time but you should have investments with ample liquidity for tackling financial crises. You can try fixed deposits which have minimal penalties for premature withdrawals. Tax-saving fixed deposits have lock-in periods and will not serve your purpose in case of any emergency. Even if savings account interest rates are lower, keep some money there at least for tiding over crises.
- Have a rainy day budget in place- Always have a rainy day budget stashed away to tide you over any such situations. This emergency budget is to be made after your appetite for risk and financial commitments are clearly chalked out. You should have a simple budget for the month and chalk out the required corpus that you need for any financial emergency. This could be around 3-4 months worth of your salary or even six months to a year. Whatever it is, start saving for it now.
- Create alternative income streams- Do you have a hobby that you are good at? Have scope to earn some extra income online after your job? You should start pursuing things that you love and they will start yielding results in terms of some extra income. Though the amount will be on the smaller side, it will give you huge satisfaction and you can keep saving this extra cash for financial emergencies.
- Lower credit card debt- Credit cards are only good when regular payments are made and cleared without bearing much interest. However, if you have a large amount outstanding, there is huge interest that you will have to keep paying. Pay off all debt on your credit card first prior to saving for a rainy day fund. You can get your outstanding balance transferred to another credit card at a lower interest rate as well. You can also convert it into monthly EMIs if your bank has this facility.
- Streamline monthly expenditure- Try and reduce monthly expenditure, save on the electricity and water bills by optimizing usage. Close accounts which you are not using anymore to avoid paying maintenance charges. Consider paying bills on time in order to avoid late payment charges.
- Get ample insurance cover- Get a medical insurance cover which will safeguard your entire family from financial instability in case of a major illness or mishap. This is a must by all means.
- Maintenance is the key- Maintain your house, car and heath religiously and you will save money on major renovations, breakdowns and illnesses in that order. You should always be fastidious about maintenance to save you money in the long run.
- Maximize what you have- Try and see the resources you have in order to save on expenses including your reward points from debit/credit cards, discounts, gift vouchers and so on. Check offers that you are eligible for as well.