EARLIER THIS year, the Financial Times held a discussion event with the website Black Ballad, which is aimed at black British women.
Discussion at the event centred around learning how to manage money better.
The theme of the discussion was certainly timely, as recent research has revealed that money management is an issue that many Britons are struggling with.
Things such as car finance deals, credit cards and personal loans are fuelling record debt levels.
According to the Finance & Leasing Association, Britons have built up a total of £9.9 billion on credit, an eight per cent per increase over the past 12 months.
Other research from think tank the Royal Society of Arts found that at least 70 per cent of the UK’s working population is “chronically broke”, leading it to claim that economic insecurity for the UK’s working population is the “new normal”.
Apart from credit cards and personal loans, one of the most common things that throws people into debt is not planning for unexpected expenses.
It could be that your car’s engine just gives up at the same time as you need to pay for an expensive school trip.
And on top of that, your washing machine calls it a day.
Unexpected expenses are part of life. But how do you deal with them?
The most important thing is to be prepared as far as you can for when you’re hit with one of life’s financial curveballs. Try to anticipate upcoming expenses.
For example, if you’re driving an older car, or your dishwasher has seen its better days, start saving up to replace the item. You may also want to start making notes on good deals when you see them advertised.
Another important strategy is to start an emergency savings fund. Just set up a savings account with your bank and add to it every month with an amount that you’re not likely to miss. Use it only for unexpected expenses and once you’ve taken the money out aim to replace it as quickly as possible.
But once you’ve met the immediate bills, how exactly can you do this?
One way to recover quickly after you’ve dipped into your emergency fund is to aim to temporarily cut back on some other items of expenditure.
Think about cutting back on the Saturday night takeaway for a few weeks.
Skip a night out clubbing or maybe have a movie night at home instead of going to the theatre.
The basic idea is to use the money you’re not spending for the next few months to refill your emergency fund. And if you’re able to get a few hours of overtime or get some freelance work, this can help you get back on track from unexpected expenses a lot faster.
But what do you do when, for example, you need to fix a broken down car before you’ve had a chance to save up in your emergency fund?
Try and assess the situation rationally. Can you make do without the item for a few months? Will that time period give you enough time to bring in the funds you need?
If it’s the washing machine that has broken down, for example, could you use a launderette?
If you really need the item, evaluate if it would be less expensive to repair it than replace it. Whatever you decide, your sole goal is to pay off that unexpected bill as quickly as you can so you don’t fall into debt.
If you put every penny you can into it, you’ll achieve that goal very quickly.
This article was published in the December issue of The Voice newspaper. You can buy a copy of the paper here.