When it comes to staying out of debt not many people know that there is one simple trick that can be used to make your financial life easier. In fact this one trick is surprisingly simple and is so easy to follow that it’s a wonder more Australians are not doing it.
The most important thing you should do to stay out of debt is to set up an emergency savings fund.
Where most people go wrong is that they forget to do this before they begin paying down their existing debts. Recent studies have shown that early saving habits do go a long way to ensuring that people remain debt free.
Yet if you ask around, you will probably find that most people have not set up an emergency fund or even put much consideration into setting one up. A simple savings fund set up today will help you and your family to avoid incurring any future debts.
You can think of an emergency savings as your family “catch all fund”, ready at a moments notice for any unexpected expenses which might arise at any time in your life.
How much should you put away into your savings fund every month? That amount is totally up to you. On average though, you should always take into consideration your personal situation and how much money you would need to cover living expenses or large unexpected bills.
A simple way to look at this is to ask yourself: how much would it cost to cover a month’s living expenses? You should have at least that much on hand in your emergency savings fund in case of unexpected financial setbacks.
Another thing to factor in is whether you have any pre-existing debts that you are currently paying back. While it’s a responsible idea to start paying regularly into an emergency savings fund, it’s not a good idea to put yourself under increased financial strain.
As a general rule of thumb, a smart saving goal would be to over time aim for six months of emergency savings.
By learning to live within your means and budget the family expenses, it won’t be that difficult at all to contribute a nominated amount of your weekly wage to your emergency fund.
To begin with, start by transferring small amounts each month from your income into a separate bank account. This not only sets a regular savings habit, but it also helps you to remove temptation by separating your every day banking account from your emergency savings account.
Putting away money every month into your emergency fund can seem tedious and quite frankly boring at times. But by regularly making savings you will soon be in the habit and it will become like second nature. Solid financial awareness goes a long way to limiting unnecessary debts and leading to a happier lifestyle.
Learn more about our same day cash loans.
