Budgeting and Saving

Two key parts of money management to help you achieve financial success.
  1. Budgeting and Saving
  2. Want to be Financially Prepared for Anything?

Want to be Financially Prepared for Anything?
Expect the best and prepare for the worst

 

By Monika Ritchie

These days, getting yourself financially prepared for anything that comes your way may feel overwhelming, to say the least. You might have come across the saying, “May you live in interesting times.” The phrase was once meant to be a curse, implying that those “interesting times” would be filled with uncertainty, stress, and unpredictability. Sound familiar?

As pandemic numbers continue to decrease in many parts of the world, people have started looking forward to a “new normal.” However, as recent global events have shown, “normal” could still be a long way off. Clearly, you can’t predict what’s coming next, but you can ‘expect the best and prepare for the worst’ when it comes to your finances. As it turns out, maintaining a little pessimism when thinking about your money is not such a bad thing, it reminds you to be realistic about spending and saving even when things are going well.

Practice Financial Restraint to Avoid Overspending

After two years of restrictions, financial restraint might not be what anyone wants to discuss but trying to “make up for” those restrictions with unnecessary spending will just get you into more financial trouble. One of the things the pandemic showed us was how quickly our finances can be impacted and how devastating that can be without a safety net like savings or an emergency fund. Whether it’s global unrest, a pandemic, or the rising cost of living, we may not be able to predict what’s coming next, but we can ensure that our finances are prepared for anything. Having funds put aside for a rainy day, planning your spending, and creating an emergency or “bare bones” budget are all ways to protect yourself financially during an emergency or disaster. Including financial preparedness as part of your overall emergency plan can help you to be as prepared as possible during ongoing instability in the world.

How to Prepare Your Finances for Disaster

Always Have Emergency Savings

Canadians reported that the need for emergency savings was the biggest financial lesson they learned during the pandemic. Of all the unexpected impacts on our finances, a worldwide pandemic was something few of us would have planned for. Many people unexpectedly lost their jobs or had their hours drastically cut, and some had to stay home with children due to a lack of childcare. This kind of unpredictability is why having an emergency budget is so crucial.

Whether it’s flooding, heat domes, fires, supply shortages, or a pandemic, the last couple of years have shown us that our budgets need to be prepared for pretty much anything. The first step to building an emergency savings account is to start putting the funds aside. It doesn’t need to be a lot, so here’s how to get started on saving.

  • Start by tracking your spending for a few weeks to see where your money is going. It’s a great way to get an overall look at your spending before building your budget.
  • Once you have a better idea of where your money is going, you can get started on creating your budget. If you’re feeling overwhelmed or just need some extra help, we have an easy-to-use budget template with the categories already in place for you.
  • Once you’ve built your budget, go through it and decide where you can cut back. It doesn’t have to be drastic. Cut back small amounts from different areas and use the savings for your emergency fund. For instance, if you replace your morning latte with a homemade coffee instead, the money you save over the month could then be diverted to your emergency fund.
  • Bulk it up when you can. It’s tempting treat windfalls (such as a bonus at work or a financial gift from a family member) as “free money” that we can spend on whatever we want. However, that money simply hasn’t been assigned to anything yet. If you are lucky enough to get some extra, make sure you funnel it to your emergency savings fund where it can do the most good.
  • Based on your budget, decide how much money you can afford to put into your emergency fund each month. Set up a separate savings account and automate a monthly deposit into it. This way you won’t have to remember to do it and the savings will start to accumulate out of sight and out of mind.
  • If you’re having trouble paring down your budget, try to focus on the difference between wants and needs. That can help clarify where you have space for cutting back.

How to Cut Costs for an Emergency Budget

Shop Smart, Not Stressed

When things start to go sideways, one of the best things you can do is to shop smart and not stressed. Unfortunately, during times of instability, many people increase their spending rather than decrease it. Suddenly buying in bulk, hoarding supplies, and buying excess amounts of food and supplies became the norm during the early months of COVID. Stop yourself from falling into this trap, even if you’re feeling stressed. In fact, times of stress are a great time to slow down and plan your spending.

  • Always shop with a list, this will help ensure that you only buy what you need and won’t be tempted by unnecessary purchases.
  • Remember that buying in excess or hoarding is unlikely to save you money and leaves less products for other people who also need them.
  • Learn to recognize how your emotions affect the way you shop. Don’t let stress rule your spending. If you’re feeling depressed or anxious, consider skipping the shopping for that day.
  • If you’re worried about overspending or staying on track, bring a friend with you. It’s a fun way to spend time together and can help you avoid shopping outside of your list.

How to Curb Impulse Spending

Ensure That Your Finances are Included in Your Emergency Plan

Including your finances in your emergency plan is crucial. Trying to navigate a crisis like losing your job, taking care of an ill family member or your house flooding, is difficult enough without having to worry about money. During these times you will need to make budget cutbacks that can tide you over as you work through the situation. One of the qualities of a good budget is adaptability. Budgets are not set in stone, nor should they be. Having one that you can adjust and rework when needed is much more useful. That’s why it’s so important make sure that your finances are an ongoing part of your emergency plan.

  • Prioritize building up an emergency fund and try to start saving up for one as soon as you can. We recommend having at least 3 and preferably 6 months of essential living expenses set aside in a separate savings account for emergencies.
  • Avoid the temptation to put off building up an emergency fund. Even though you may want to pay your debts off first, the likelihood of something unexpected happening means that with no savings, you would have to rely on credit, and potentially get deeper into debt, to pay for the emergency.
  • Stay on top of your debt payments. Trying to manage debt on top of your other financial obligations is already difficult enough. It would be even worse during an emergency if you were behind when the disaster struck.
  • Make sure all of your insurance policies (e.g. life, medical, home) are always current and paid up. If you were facing serious damages, due to floods or fires for example, not having insurance could be financially devastating.

Do You Think of Savings as an Important Expense?

Plan Ahead Financially With Expert Help

Managing money and planning ahead financially can feel overwhelming when you’re already facing a lot of stress in your own life or feeling it from the world overall. Contact us for help getting started. Our appointments are free, confidential, and non-judgmental no matter what your financial situation looks like. Whether it’s economic instability, natural disasters, or global unrest, preparing your finances for the unpredictability of life is crucial to maintain stability and financial wellness.

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