The least talked about topic in personal finances – Emergency fund.
Probably because it sounds scary and everyone likes to believe – Oh, I am not going to have any such emergencies in my life.
We all talk about setting aside 20-30% towards savings and investments. In ranking order, the priority should actually be taken by emergency fund and one should be putting aside atleast £100 per month towards emergencies.
Well, what do we mean by emergencies and why should anyone be concerned about it?
Emergencies we are talking about here is not as rare as you may think them to be. They are events that result in an unexpected outflow of money.
Let’s brainstorm.
You are a young couple/a young family. Unexpected outlofws could come in the form of:
· Dental care – which is not free in the UK
· Gifts you got to buy for sudden guests or sudden home invitations
· House repair and related purchases
· Car repair and increased commute costs due to that
· A shopping spree you want to go into since its summer
· If you have kids – their unexpected demands
· An exam you ended up failing and re-training costs as a result of that. This includes practical driving test too.
What if you are much younger, just out of Uni and a first time earner:
· A sudden outing planned by your friends
· Movement to a different city you did not expect
· Health and wellbeing care costs
Not the emergencies you thought of, right?
As an immigrant it takes to time to understand how life in a new country is over a day/ a week/a month, the value of a £ and the outflows you would have over a month to actually live there. No one talks about this.
When we entered the country 3 years ago, I remember we had surprises every other week, or should I say shocks? We would receive them in the form of bills explaining we need to set up an account and pay an amount every month:
· Council tax
· TV licencing
· Work memberships
Let alone shocks, It took months for us to simply understand how much we would need for groceries, eating out and commute.
And ofcourse, emergencies could also come in the form of a sudden need to travel back home, which costs a lot if you live at a distance which takes more than 6 hours to reach.
The best advice I can give to immigrants is to start setting aside the whole lot towards emergency fund from the first month. Investments can take a backseat even upto a year.
But let me tell you one thing, emergency fund would only make sense when you have a clear workable budget for your spendings month on month. Only when we have a budget can we be ready and prepared for the unexpected, right?
If you have not done that yet, its time to start taking control of your money. Confused where to start? Don’t worry, we have got you covered. Just book a free meeting to learn about 1-on-1 workshops we provide at Million Goals.
You can choose out of 2 programs – Fast-track and Know it all, depending on your requirements. They are online 1-on-1 workshops for you to learn all about personal finance management and take control of your money at the comfort of your home.
Written by,
Mrudula Muralidharan
Personal finance coach & Founder,
Million Goals
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