We’ve all had those moments when, just as we get our budget sorted, an emergency happens and we have to spend money we don’t have. This year, let’s avoid emergencies by being smarter with our money.
The best way to avoid emergencies is to do better planning. For instance, just by paying attention to the loadshedding schedule in your area, you can plan your meals so that you don’t have to buy expensive takeaways most days of the week. If there are days when you can’t make a different plan, you put the takeaways in your budget so that you can see where that expense fits into your overall plan for the week or the month. And if affording more takeaways means you are going to be short in some other area, you will know about it before that shortfall turns into an emergency.
Keeping track of all your spending is a powerful way to improve your planning:
- Analyse your expense tracking every month to see where you are spending more and where less. Use that information to adjust your budget.
- Look at your expense tracking of the past year to help you remember to plan for those once- a-year expenses, such as having your car serviced or going to the dentist for a checkup.
- Use your expense tracking as an early-warning system. If you see that over the past few months you often had to buy headache pills, it could be an indication of a bigger health issue. Going to the doctor for a checkup could stop an emergency from happening.
By being proactive you can prevent many emergencies. Fixing a problem early is usually also far cheaper than dealing with an emergency.
No matter how good you are at planning your life and your finances, real emergencies will still happen.
Fortunately, even for those it is possible to have a plan:
- Have an emergency fund. Save some money every month so that you have funds available to tide you over. Not only will you avoid expensive debt, but you will have peace of mind knowing that you have a safety net.
- Take very good care of your credit health in case you need an emergency loan. Don’t open too many accounts, always pay your loan instalments on time, and check your credit report at least once a year to make sure it is accurate. When you need an emergency loan, you need to have the kind of credit record that will make it easy to get one.
- Identify a credit provider upfront, so you know who to approach for an emergency loan. Only go for companies that are registered financial services providers and compare things like interest rates and terms and conditions. It can be difficult to make good decisions when you are under pressure, so doing some of this homework beforehand can help that you don’t end up in even more financial trouble later on.
Life in South Africa is getting more expensive, so give yourself a break by doing the work that will help you to not spend money on emergencies that could have been avoided.