1. Exploring Your Current Savings Options
As a consumer, you always have a choice when it comes to saving, and household expenses are an obvious starting point. As a quick illustration, you could compare the current rates that power companies are offering, and be willing to make a switch if you see a better rate. Similarly, whether you have one of the variable or fixed-rate home loans, you could think about refinancing your mortgage if that will help you realise more savings than on your current loan.
Doing this – cutting your spending immediately – will enable you to pay off your surprise bill more quickly. You can also use this opportunity to build a good savings habit that will see a more successful budgeting for other unexpected events or budget blowouts in the future.
2. Preventing Major Expenses
While unexpected events happen all the time in life and there’s no way to completely eliminate the possibility of their occurrence, you can take measures to reduce the risk of unexpected events.
- Car trouble –Car trouble can happen to any vehicle, but good maintenance and regular servicing can reduce the chance of you having to foot a major repair bill. Of course, safe driving can also help. Make sure you have comprehensive car insurance to cover you on the road.
- House maintenance –Have any damage in your home fixed as soon as possible, to avoid the risk of any damage spreading or escalating.
- Appliances and electronics –Keep your appliances and electronics clean and well maintained, and make sure they’re only used as instructed by the manufacturer.
- Medical and health situations –Have regular medical check-ups as recommended by your doctor. Stay active and eat healthily.
3. Budgeting for Unexpected Events in the Future
Many households have an emergency fund to ensure that they’re able to cover the costs of any unexpected budget blowouts.
- Amount –How much should your emergency fund contain? This will depend on your current income and expenditure level. A basic rule of thumb might be to keep at least 2 months’ worth of household expenditure or income in your emergency fund.
- Keeping the fund –It’s a good idea to keep this emergency fund in a high-interest savings account, rather than a more formalised product such as a term deposit. This ensures you can access the amount quickly in the event of an emergency, while allowing your money to earn a good interest.
- Review –You might want to review this fund once in a while, to check that you still have an adequate emergency fund to meet your needs,in case of an emergency.
You should have a household budget, along with your emergency fund. Your household budget records all your spending and inflows. You can review this on a regular basis to check for any one-off items, so that you can plan for contingencies more realistically.