According to the most recent data from Pordata (2021) and a report from the Francisco Manuel dos Santos Foundation, about 60% of Portuguese people who are below the poverty line cannot afford unexpected expenses. Faced with this reality, it is essential to be able to beware of possible “slips” your budget, even if it is sometimes not easy to do so. So, get to know, in this article, some solutions that can help you be prepared.
Contribute monthly to your emergency fund
Regardless of your financial situation, having a emergency fund it is always a safeguard to face difficult times. Unexpected expenses can “knock on the door”, so you should be careful not to compromise your financial stability. So, this money emergency fund must allow you to cover at least six months of expenses. However, depending on your situation and lifestyle, this financial reserve may be higher or lower.For example, if you don’t have any charges, like a home or car loan, and overheads (water, electricity, etc.), then you probably don’t need such a large emergency fund. If you have several expenses, such as food, education of your children, housing, among other expenses, having a higher emergency reserve can make all the difference in “rainy days”. this fund should only be used in urgent situations and should not be seen as a normal saving. This means that you should not use the money from this reserve to pay, for example, a down payment on a home loan, taxes, or non-essential expenses, such as vacations or impulsive purchases. Instead, you should use this extraordinary savings to face situations of unemployment, health problems, accidents and/or urgent repairs, for example.Also read: Need to cut expenses urgently? Here are some solutions
Set a monthly budget to control your expenses
Create a monthly budget It’s one of the most effective ways to be prepared should an unexpected expense arise. Knowing what your income and expenses are, especially where you are spending your money, is a good step towards keeping your finances stable. If you haven’t set any budget yet, it’s always a good time to start. First, you must create a list with your income and expenses, organizing them by categories. This includes food, entertainment, education, credits, among other costs that you have on a monthly basis. In this list of expenses, don’t forget those that you only have annually, such as insurance and taxes. Although it only happens once a year, the truth is that this money “comes out of your wallet” every month, indirectly. After categorizing your charges, you should analyze which ones are strictly necessary, the ones you can reduce and the ones that don’t add value to your life. For example, if you’re paying for subscriptions to services you haven’t used in a while, or making impulse purchases, then you should readjust those habits. Your wallet will thank you. Also read: 9 Tips to reduce your car expenses have control over your expensesThese are not enough to deal with any unforeseen circumstances. In terms of income, you can increase them by changing jobs or working longer hours, but in terms of expenses, this is not always possible. After a certain point, it becomes difficult to reduce the burden, without your health, for example. Bearing in mind that it must never be compromised, the solution is to increase their income, rather than “tightening their belts even more”.look for a extra work where you can make use of your skills, not only to speed up the process, but also because you already know the area of specialization. This will help you to make the most of the extra hours and avoid the need to learn something new. However, always keep in mind that extra work should not harm your full-time job. Still, you should take advantage of this extra work to improve your skills or, if convenient, learn a different area to increase your range of options.Also Read: Lost Income? Consider consolidating expenses
Always negotiate your contracts to reduce charges
In addition to setting a budget to control your expenses, you should also take the opportunity to negotiate the various contracts you have to reduce your charges. Knowing your expenses is a good start, but it shouldn’t stop there. Try to find out about the values practiced in the market and collect several proposals and understand how much you can save monthly. For example, more than ever, you must negotiate your electricity and/or gas contracts, due to the announced increases. Likewise, if you have never reviewed your internet and/or television contract, take the opportunity to do so. Negotiating the number of channels, the speed of the Internet, or simply transferring your phone number from another operator and associating it with the Internet contract, can help to reduce the monthly payment. 6 month expenses?
Amortize your credits to have more disposable income
Paying off your credits as quickly as possible is one of the solutions to create answers in times of financial squeeze. All credits reduce your disposable income, that is, the money you have left after paying all your fixed expenses. The more credits you have, the lower your disposable income. This means that, in the face of an unexpected expense, your disposable income reduces even more or, in the worst case, you will be forced to draw on your savings. two methods to amortize your credits. You can start by focusing on paying off the credit with the highest interest rate (“avalanche method”), which is widely used when the volume of your loans is relatively similar, but with different interest rates. This method allows you to minimize the amount of interest payable over the course of the credit. Nonetheless, this process can be time consumingso it is not suitable for people who are easily discouraged. There is also the “snowball method”. Compared to the first, this method aims to pay off the smallest debts first, regardless of the interest rate. The main advantage of this method is that it manages to obtain results more quickly, that is, to have a greater disposable income after paying off each debt in full. Whichever method is best for you, the important thing is to reduce your debts to maintain your financial stability. Also read: How to save on service subscriptions and alleviate monthly expenses
Have health insurance to avoid major expenses
not always control your expenses means cutting. Quite the opposite. Sometimes it is necessary to make some sacrifices to protect yourself against “greater evils”. We are specifically talking about having health insurance. This can help you avoid higher expenses in case any health problems arise. Regardless of whether you are still young or not, health insurance can bring you benefits.There are several options on the market. On the one hand, you can evaluate several proposals and choose the one that best fits your budget and your needs and, on the other hand, it can become difficult to understand the differences, which often leads people to pay more for services they , probably will not use. Analyze the coverages and choose what can best respond to future and unexpected needs. Also read: Clean up all your unnecessary expenses