Receiving an unexpected bill is never pleasant but new research has found that even those who are relatively well-off would struggle to cover the costs.
A poll conducted by YouGov for The Times found that one in three ABC1 workers (middle class adults) said they would need to borrow money to cover a surprise £500 bill. For those who are C2DE workers (the unemployed or manual workers), the number who would not be able to pay goes up to nearly half at 46%. They also found that young people aged between 18 and 24 would struggle the most, with 49% unable to pay.
These figures highlight the issue with the lack of disposable income, high rents and the increased cost of living, which leaves less money to put aside for an emergency. The poll also found that there is an issue with debt, finding that 48% of the households surveyed were in debt (not including their mortgages).
Here’s how you can build an emergency buffer so that you don’t find yourself panicking at the arrival of an unexpected bill:
Where does your money go?
First of all you need to know what you are spending your money on before you can decide where you can make savings. Use a budget planner like Goodbudget to list out all your expenses and to find out what you are spending your money on, then you can move forward with cutting down on your expenses and start saving money.
Try to have all your bills arrive at the same time, just after pay-day so that you can pay for them first, then you will have a clearer idea of how much money you have for the rest of the month. With what’s left, transfer regular amounts to a separate account so it’s set aside from your regular spending account.
Consider the alternatives
Even if you do have an emergency fund you might find that in some cases you need to have access to a large amount of money at very short notice, and your find might not cover it.
In the case of big life changing events like redundancy or illness, are your savings enough to see you through a few months with no salary? If not, you should consider protection insurance. The right plan will cover you for loss of earnings or illness, but do check them out carefully as they won;t be right for everyone.