To be able to keep up financially even in the most unexpected situations, it is essential to build a safety net in the form of an emergency reserve, that is, saving you 3-12 months of spending. Here are some simple tips for doing this.
According to an American survey, nearly half of households would not be able to cope with a $ 400 ($ 100,000) unexpected outlay without some form of credit. Public opinion polls do not suggest much good in Hungary either. According to a survey last year, nearly one-third of households reported that their income did not cover their living expenses within a year. However, with planning and awareness, it is easy to build up an emergency reserve that can solve a tight situation. Let’s see how.
Clarify why saving is important
The emergency reserve is very useful because an unexpected situation does not completely cover the family budget. There will always be a sure point where you can get in trouble. You should try to make up for it over time if you use it for something. In general, it is worth setting goals to help you see why you are saving (eg travel, home, child’s future, health, retirement).
Discover what you’re spending
Most importantly, you should try to understand how much you spend from month to month and how much you maintain your standard of living. It is worth clarifying issues within items of expenditure that are regularly encountered from month to month (such as bills, installments, insurance) and which always appear in different amounts (such as occasional expenses, entertainment).
Take this into account in the size of the emergency reserve
It’s worth thinking about how to cope if, for example, you lose your job for half a year. How much money would it cover to cover all your vital expenses? Or just take a look at the biggest spending month ever, when everything came together. It would be worth putting aside that you can at least survive these on your own. As a rule of thumb, consider a 3-12 month release.
Think small first
Finding a place to save money in your budget may be difficult at first, so it’s a good idea to start small. For example, start with the price of a daily coffee or chocolate, which can save you 5-6 thousand forints a month, or 60-70 thousand for a year.
Look for spending that you can restrain
A little rationalization always comes in handy, so it’s worth reviewing your regular costs from time to time. For example, you can save on a cheaper phone, TV or internet subscription. With relatively little effort, occasional expenses can be cut and the amount freed up can be saved. Over time, you may get on quite well, and you will find savings in places you never thought you would have.
Think about how much you spend unnecessarily, such as how much you spend, on unhealthy foods, drinks, and harmful habits anyway. Or pay attention to the action and try not to fall into the trap of rampant spending.
Fix your finances
You might be pushing your monthly expenses with a long-overdue overdue debt, or a credit card that is not reasonably used. You should also be aware of a mortgage loan: with a loan redemption, you can easily save a few thousand forints on a monthly repayment, and repay the bank millions more overall. You may also be spending a lot on banking, though there would be a $ 1,000 cheaper account package.
Separate the emergency reserve completely
After you commit to saving money, it is advisable to periodically deposit the money you have collected into a separate account. This way, you are not in any way tempted to use the amount. Although the available profit is low, it is worthwhile to put the money into some form of interest-bearing savings, such as retail government paper, where the interest-bearing treasury bill actually yields 2% (here, too, costs can be completely avoided if purchased at the Hungarian Treasury).