No one knows tomorrow. Chances are you’ve said this to someone at least once in the last twelve months. But who’s counting, eh? What matters here is why you said it. It was probably the easiest excuse to blow that last 1k in your bank account. Or the perfect cover for taking part in your 1001 other guilty pleasures. You know, YOLO. And we agree that you should do the things that make you happy because, indeed, you only live once. But life is not always that straightforward .
Everyone should prepare for unexpected events. Like a road rager hitting your car on a busy Monday morning on the Third Mainland Bridge.
You’ll probably come out of your car, throw words at each other, and recite the customary Lagosian threat of “do you know who I am?”. But what happens afterward? Bills. And that’s if you have car insurance or emergency funds ready to fix it. So, knowing this, we’re offering you a few tips on how to prepare for financial emergencies.
Obey the greatest personal finance commandment — save
Emergencies don’t announce their arrival. They just…arrive. One of the best ways to prepare is by saving. It looks like the easiest thing to do, right? But it will surprise you how difficult it is for a lot of us to save money.
According to the Global Findex database:
48 percent of adults around the world reported having saved or set aside money in the past 12 months. In high-income economies, 71 percent of adults reported having saved, while in developing economies, 43 percent did so.
The good news is there are now better ways to save without compromising yourself. For instance, you can lock away funds for some time. Like an emergency fund.
Locking it away means you won’t be able to touch the money until its set maturity date. Let’s say you create a savings plan in the Carbon app for the next six months starting January. The funds will only be available to you on the corresponding date in June.
Avoid little expenses from becoming huge burdens
Remember that one time on a beautiful Sunday afternoon, you suddenly realize you’re out of gas as you’re about to cook your Sunday special? Yes, it happens to most of us. And it’s the easiest thing to do — forgetting little expenses until they become huge burdens.When it comes to personal finance, there are no little expenses. All expenses deserve equal treatment. Always have a budget for spending at the beginning of each month. This will serve as your guide for what is spendable and what isn’t.
Consider paying in installments for certain items
Many times we don’t want to spend so much on certain items. But we eventually do because they carry a high degree of need. Like a refrigerator for keeping your foods from spoiling or an air conditioner because the heat is not exactly in a friendly mood. The good news is there are now payment plans that allow you to pay for expensive gadgets and electronics in small, equal installments at no interest. This enables you to free up some extra cash for other things that require attention. Or keep for needs that may arise in the future.
A side hustle can help straighten things out
In a place like Nigeria, you can’t have too many sources of income. For some, it is already a way of life. Another route to achieving the things they want. And from an emergency perspective, you can be more comfortable tackling them if there’s hope for money from another place.
So, you may need to consider getting alternative sources of income if, for instance, you currently work a 9–5 job. But that’s not everything. Apart from income diversification, a side hustle teaches you accountability. You’re your boss but, you also know you can’t afford to mismanage your funds. You want to make sure you optimize for the future and, ultimately, growth.
Just before you go…
Let’s get one myth out of the way. Many people think financial emergencies have to be unfavorable events. Not true. They’re simply expenses you didn’t see coming.
You probably just got a new job and need to get yourself a new set of clothes. In perspective, that’s a good thing. You only don’t have the funds to change your wardrobe in time for resumption.
The crux of the matter is to always prepare for all kinds of outcomes. And you can start by taking better care of the money you have now.