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Emergency cash pots! Want to build an emergency cash pot but don’t know where to start? I’m going to talk you through how to build and maintain an emergency cash pot.
The biggest reason that people get into investing money is to have money put away for a rainy day. Whilst investing for a big purchase like a house is great and a goal for many, you also want to make sure that you’re especially covered for unpredictable emergencies. But so many people don’t know how to build an emergency cash pot. This can be for a variety of reasons such as, being new to investing, having poor money management skills and the biggest of them all having a low income. Having a low income can lead you to believe that you can’t build an emergency cash pot simply because you don’t have anything to invest. But i’m here to tell you that even with a low income you can still build an emergency cash pot.
1: This is for your own best interest.
Remember the one benefiting from your emergency cash pot is YOU. Unlike with bills which are towards someone else’s rainy day. You’re making your own financial security a priority. Should something happen that means taking time off work. You should have enough to survive for a couple months at least without assistance and most importantly without stress. You can set up a separate savings account solely for this purpose to keep track of your emergency cash pot and avoid interfering with it.
2: Starting small still brings rewards.
If you’re currently receiving a low income, starting small with a monthly investment of £5 a month for a year for example is still £60 towards Christmas. As you go along and your circumstances improve you can easily increase this monthly amount. But what’s important is making a start. We all have to start somewhere.
3: Use your expenses as a guide.
If you’re unsure how much to invest, work out how much your outgoings cost for a month. Use this total as your aim. Whilst you’ll remember to include the obvious outgoings such as your rent or electricity bills. If you have children that are in private school, also include their school fees for a term. Whilst covering private school fees won’t be applicable to everyone. How much pack lunches cost for you or your family is definitely something that is relatable for many and should be included.
4: Would saving for a one off event be better for you?
Your emergency fund is meant to be what will most help you when you need it. So you may not need or want to build one for continuous outgoings. You can build one for a one off big expense such as Christmas, birthday or anniversary. Christmas has always been my biggest expense, it’s the one occasion that I spend the most on and am ok with overspending on. I’m comfortable with overspending on Christmas because I plan in advance in the form of a cash pot that I put into each month. So any overspends would only be slightly outside the emergency cash pot if at all.
5: Use my free save £5,000 in a year guide.
My free save £5,000 in a year guide is a great printable for you to use to build an emergency cash pot. It’s perfect for newbies to investing and those with experience as the hard part is already done for you. I developed it so the monthly deposits would be achievable amounts. It works especially because there’s a section for you to add your goal that you’re saving towards. Also tells you how much you would have saved already, which in investing your biggest ally will always be staying motivated. If you don’t meet the deposit amount for one month don’t worry!, working with the guide is flexible and something to encourage you not add more stress. My save £5,000 in a year guide is available for instant download when you first come onto SimplyCashHacks.Com.
6: Use visual aids.
Whether this is a printable that you’ve downloaded or a list you’ve made yourself. Visual aids definitely work by helping you to mentally picture your end goal and see how far you’ve come since you started. When motivation starts wearing thin, this is what will get you through. A visual aid can be basic and made in less than five minutes such as a list, or something you’ve shown your creative flair with. Both ways are fine! it’s just whichever method will best help you.
7: Hold yourself accountable.
Whilst you’re noting down the total of your monthly outgoings, you’re likely to notice repeated areas of overspending that will flag up. You may not even realise how much you’ve been spending on getting cabs or takeaways recently. These are the areas you want to target first to cut down. However, this may not be as easy as just going cold turkey and never having to think about again. To break these easy to develop habits you need to hold yourself accountable for them. Hold yourself accountable by setting yourself a limit for these things, such as once a month/every two weeks takeaway night. Rather than every week splurges. Small changes like this will definitely show an improvement in your emergency cash pot over time.
8: Be realistic.
You’re more likely to be successful if you’ve been realistic with how much you can afford to deposit from the beginning. If you have a low income, chances are you won’t be able to regularly deposit £100 a month into your emergency cash pot. So this is where we go back to knowing how much your outgoings are and to where and identifying areas that could cut down. Again even £5-£10 is a great start.
9: Ease your way in.
If the thought of saving towards a goal that will take you a year to achieve scares you. Try starting with smaller or nearer goals first to get yourself used to building emergency cash pots. This could be something as simple as just one month’s rent nothing else or a subscription fee.
10: Get family involved.
If you live with your partner you’re both likely to be contributing one way or another to household expenses. Whilst it’s perfectly fine to just have an emergency fund for yourself, you can make your monthly deposit goals more achievable by diving how much you set between you and your partner. You’re more likely to stick to building your emergency cash pot if it’s something you’ve both gotten to enjoy building together. You can even set the end goal as something for you both to enjoy such as a treat couple’s spa trip with any excess savings going into your savings account.
With these tips you can go away and build your tailormade emergency cash pot. Try not to overthink it and imagine your goal being achieved at the end. Building emergency cash pots can turn out to be a fun family activity. When combined with making money through a side hustle that you enjoy doing.
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