Having permanent employment, we usually don’t think about financial problems. We have money for current expenses, we regularly pay liabilities and we usually rarely think about what might happen in 5 or 10 years, or even a month. However, it is worth thinking about what will happen when we lose our job? It will definitely destroy our peace of mind, both psychically and financially. Therefore, we should think about a secure pillow for our budget, which we can try, even if we have a loan.
Financial pillow – what is it?
A financial security cushion is, in other words, an emergency fund, which is designed to balance our budget, even in the event of temporary problems with the funds. It is an additional capital when difficult times come, due to job loss, illness or accident. Having a supply of financial resources, we will be able to calmly look for another job or take medical treatment, without worrying that we will run out of cash and we will run into trouble.
What financial cushion will be sufficient? This issue should be approached individually. Each of us has different earnings and different needs. It is best to aim for an amount corresponding to the costs that our household incurs within 6 months. To begin with, 3-month security is enough, but the actual balance in the budget will provide us with 12-month savings. It is worth raising the bar all the time to be prepared for a worse period in our lives, which can happen when we least expect it. It is not easy to achieve this, but step by step we will be able to create a solid financial cushion. It will allow us to survive even when we lose our main source of income. Where to keep the cash? Preferably on a deposit or on a savings account. Our money will be safe there. What’s more, they will definitely tempt us less than if we accumulated them on a regular bank account.
How to collect money for a financial pillow?
Building a financial cushion is, above all, saving money. As everyone knows – not everyone can put down, especially if they have a light hand to spend cash. Therefore, you need to start with small amounts that will not really be felt for our budget. Then you should gradually increase the amount set aside, which will depend on our income and expenses. Some spend less, others more, so you should set a goal and try to stick to it. Having a specific date to which we want to set aside funds, we will try harder to implement our provisions. We will quickly appreciate the saving habit.
Analyze your finances
To start raising money for a financial security cushion, you need to analyze your finances. The most important thing is for your revenues to be higher than the amount we spend every month. If this is not the case, you will need to set restrictions. Accurate planning of expenses, including various installments that we need to regulate, as well as current needs, is helpful in this. Of course, it would be best to pay any arrears immediately, but this is not always possible. Therefore, you should optimize your budget and take steps as soon as possible to start creating your financial security cushion.
Is the loan an obstacle to building a financial cushion?
can the loan be an obstacle to building collateral? If we try to control our budget, we should be perfectly aware when we can support ourselves with additional money, and when we cannot take a loan or payday loan. When we pay the payday loan on time, an additional commitment should not be an obstacle. The worst part is delays and arrears, which increase interest and additional costs. They prevent you from sticking to the plan and postpone the deadline for achieving your goal. Meanwhile, if we decide to take a loan while maintaining the principles of reasonable borrowing, we will be able to use the potential of additional cash to the maximum.
Loans make it possible to enrich our budget when we need it, so we don’t have to give it up. On the contrary, we should take them when we need money for more expense. Thanks to this, we will not violate the safety cushion, if we have already started to create it, we will only take money from another source. The payday rankings will help us to choose the payday loan that meets our needs. However, it should be remembered that the payday payment should not be too high. We must have cash, installment, and security, as well as current expenses. It may seem to you that this is beyond your capabilities – not only financial but also the ability to plan your budget. Meanwhile, borrowing responsibly, i.e. without exaggerating the amount, nothing bad should happen.