The pandemic and subsequent lockdowns have made a significant impact on many people’s finances in recent months. According to figures from the Office for National Statistics, published in the Guardian, almost nine million people have had to increase their borrowing just to make ends meet.
Financial disruptions can cause large amounts of stress, which can significantly impact your health, happiness, and productivity. Read on for three simple things you can do to gain more financial peace of mind.
1. Build up an emergency fund
One of the easiest ways that you can start to gain more peace of mind is by putting together an emergency fund.
A survey by the Yorkshire Building Society, reported in Money Expert, found that more than a quarter of Brits don’t have enough savings to support themselves for a month if they were made redundant. Even more worryingly, a further 15% have no savings at all.
If you don’t have any savings to fall back on, you may find that even a small disruption to your finances can have a large effect on your life. That’s why it’s so important to build up an emergency fund, so that you can absorb economic shocks without them affecting your financial wellbeing.
An emergency fund can help you to gain more financial stability, as it can act as a buffer against any short-term disruptions that you may encounter. It can also help you from having to rely on credit if you’re unable to work for a period of time.
As a general rule, most experts recommend that your emergency fund should contain enough to cover three to six months’ worth of expenses. This can help to give you peace of mind, knowing that even if disaster were to strike, you’d be able to stay on top of your bills until you can get back on your feet.
However, if you are self-employed or work in a field that is particularly at risk, you may want to consider keeping a larger fund.
If you don’t already have one, it is never too late to start building up an emergency fund to cushion you from the impact of financial shocks. A good way to start is by paying any unexpected money into an easy-access account.
However, if you are struggling to find enough money to build an emergency fund, you may benefit from speaking to a financial adviser. They can help you to manage your money more effectively, enabling you to put some aside for a rainy day.
2. Pay off your debts
One of the biggest impacts of the pandemic has been that a large number of people have found themselves temporarily unable to work. This has led to many people having to borrow money to pay for their essentials.
According to a report by debt charity StepChange, reported in the BBC, young adults were the most likely age group to need to borrow in order to make ends meet. This isn’t surprising, as they typically have lower salaries than the UK average and have had less time to build up a cushion of savings.
However, if you don’t pay off debts quickly, they can quickly accrue large amounts of interest. This can put even more strain on your finances and potentially lead to a debt spiral. That’s why paying off your debts should be a priority if you want to gain more financial peace of mind.
3. Make sure you have financial protection
One of the most effective ways you can gain financial peace of mind is by ensuring that you have protection against short-term disruptions. There are many forms of financial protection, so it’s important to find the one that’s right for you.
A recent study by EY, published in FT Adviser, found that more than half of Brits are more likely to prioritise savings over protection. However, doing so may make you vulnerable to financial shocks.
For example, if you fell ill and were unable to work temporarily, this would likely have a significant impact on your finances, particularly if you had ongoing commitments such as mortgage payments. This is where income protection could help, as it would pay you a portion of your salary after an excess period.
Knowing that you have protection in place can be a great way to gain more peace of mind, letting you rest assured that your finances could cope even if anything unexpected were to happen.
If you want to get protection, but aren’t sure which type is right for you, you may benefit from speaking to a financial adviser who can help you to find the policy that is most suitable for your needs.
Get in touch
If you want to gain more financial peace of mind, get in touch as we can help you find the best way to do so.
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