Founder and Director of EnableMe Financial Personal Trainers Hannah McQueen is here to help you make the best financial decisions possible, pandemic or no pandemic.
The Rainy Day Fund
Instead of a rainy day feeling like an unlikely prospect, thanks to Covid we now know all too well why we’ve always been told to save for one! Yes, it’s a good idea, but much like the earthquake survival kit we’re all supposed to have, when crunch time came many of us found the cupboards were bare.
Ideally, you should have a buffer that could see you through for at least three months, but preferably six months if you lost your job. That means you first need to understand the minimum amount it costs to run your life on a no-frills basis.
Your buffer doesn’t need to be cash under the mattress or a savings account, however. It can be that you’ve got access to funds or assets that can be quickly turned into cash, it could be that you’ve got a revolving credit you can draw down on, or it could be the available balance on your credit card. It’s also worth knowing that most people can sustain a 20-30% drop in income without going backwards, simply by moving to a no-frills lifestyle and cutting out their discretionary spending.
It’s also a good idea to consider what insurances you have in place. Most people make plans and financial commitments on the basis that their income will continue at its current level, or that one or both spouses will continue to be able to work – but plenty of things can get in the way of that.
Ideally you want decent cover – but for the best price and the shortest duration possible. There’s little point being over-insured, and the closer you get to being debt-free the less you should need.
Reach Hannah and her team here and check our Hannah’s Financial Freedom at Any Age Series in Thrive