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Creating an emergency budget that works for you

It could take months, even years, to clear debt – especially if you used your credit card and you know you’ll be slugged with snowballing compound interest each month you don’t pay it off.

Things might get worse if another emergency comes up and you don’t have the means to pay for it. Before you know it, you’ve dug yourself into a deep financial hole that can be hard to get out of.

That’s why it’s no surprise that financial experts recommend creating an emergency fund. It’s a pool of money you always have on hand to cover any unexpected expenses.

Any fund is better than no fund

The figure most often cited by finance media personalities is six months’ salary. So how much do you really need?

The best way to decide on a figure is to look at your personal situation, and then create a budget accordingly. Consider possible future expenses, how much you earn, what your weekly costs are and how much you could realistically live without. It will take time to build your emergency fund, but it will be worth it in the end.

Think about it – even a few hundred dollars set aside now could mean not dipping into your credit card balance later on. This can help you avoid the rollercoaster of debt.

Work out what your unexpected costs could be

Think about the types of expenses that could come your way when you least expect them. List anything that’s outside your normal budget. This might include urgent car or home repairs, medical appointments, vet, or dental bills, or even an unexpected interstate or overseas trip to visit a sick family member.

While it’s unlikely you’ll get hit with all these expenses at once, having an idea of your potential future costs can go a long way in helping you decide your emergency savings target.

Revisit your budget

Once you know what you’re aiming for, look at your budget and work out how much you can afford to put away each week. If you don’t have a budget already – today’s the day to start one.

Consider your current financial commitments, then decide on a percentage of your wage that you’d like to put aside. For example, you might commit to saving 10% of your take-home pay until you reach your emergency fund goal.

If you’re financially stretched at the moment, putting aside money each week for something that might not happen in the future can seem like a big ask. But it may not be as tough as you first think.

Be consistent with your savings

Consider creating two separate bank accounts – one for your weekly expenses and ‘fun’ money, and another for your emergency fund. Then set up an automatic transfer so the money earmarked for emergencies goes straight into that account each payday. This way, you’ll barely even notice the money that’s gone. And over time, you’ll get used to having slightly less in your weekly expenses and ‘fun’ money account.

Replenish your fund after use

With your emergency fund now set up, you can relax knowing that you’re financially prepared for the unexpected. But remember – your fund is there for urgent, necessary costs only.

If you do need to dip it into it for a real crisis, then that’s fine – that’s what it’s there for. But make sure you top it back up again when you’re financially ready to do so. This way, if another unexpected bill comes your way, you’ll be prepared.

Talk to an adviser

Everyone’s financial situation is different. That’s why talking to a financial adviser can be so useful. They can show you how to create a budget and savings plan tailored to your needs, including an emergency fund. An adviser can also help you find the right insurance to protect your finances in the future.

Source: Colonial First State

Hardik Gupta

Senior Paraplanner

Education: Master of Business Administration (Finance & marketing) & Bachelor of technology (B.tech)

Hardik is a financial professional with an MBA in Finance and extensive expertise in financial planning. As a Senior Paraplanner, he brings a wealth of knowledge and a deep commitment to helping clients achieve their financial goals.

With significant experience in the financial industry, Hardik excels in creating detailed financial plans, performing comprehensive financial analyses, and supporting financial advisors with client portfolio management. His strong background in finance provides him with a robust understanding of market dynamics, investment strategies, and risk management, enabling him to deliver tailored solutions that align with each client’s unique needs.

In his free time, Hardik enjoys spending quality time with his family, biking, playing snooker, and exploring new culinary delights through cooking.

Mayank Manta

Team Leader

Master’s of Commerce & Bachelor of Commerce

Mayank has 8 years experience in the Financial Services industry, with extensive understanding and in-depth knowledge of Financial Planning.

Mayank enjoys systems and numbers, ensuring that every step that needs to be followed gets done and every step that is unnecessary be removed from the process. Being an open, honest and naturally empathetic person, Mayank goes out of his way to ensure that clients, family and friends are happy and content. In his free time, Mayank enjoys spending quality time with my family, creating lasting memories with the people who matter most to him.

Another activity he enjoys is travelling – exploring new places and experiencing different cultures is something that excites him.

Jack Wyer.

Financial Adviser

Bachelor of Business – Major, Financial Planning

Jack Wyer is a Financial Planning Graduate who has recently commenced his Professional Year with Verity Wealth Solutions. With a Bachelor’s Degree in Business, Majoring in Financial Planning, Jack has demonstrated high achievement, receiving merit awards in both 2021 and 2022. Jack’s passion for helping others and his desire to see others succeed financially have been the driving forces behind his chosen career pathway.

Driven by his passion for financial well-being and his innate ability to connect with others, Jack is dedicated on making an impact on the lives of others. Through his expertise, empathy, and commitment, he strives to empower people to achieve their financial goals.

Alongside his financial planning endeavours, Jack finds joy in spending quality time with friends and family and wants to slowly visit new countries along the way. Jack is also an avid Soccer player, actively playing for a local team. When it comes to supporting a team, Jack goes for Tottenham in the English Premier League.

Jack Wyer’s Adviser Profile