17 March 2025
general
Life can be full of surprises, some pleasant and others not. Some surprises may feel more like curveballs and, if you’re not ready for them, could leave you out of pocket.
Whether it’s a flooded basement, a broken-down car, or an unexpected tax bill, unplanned costs can derail your financial stability if you’re not prepared.
Fortunately, there are ways to bolster your financial preparedness and ensure you’re adequately prepared should a nasty surprise come your way. Keep reading to learn more about how long-term emergency planning could help you.
Proactive budgeting is about more than just the basics
Budgeting isn’t just about tracking income and expenses. It’s about making room in your finances for the unexpected and learning how to identify areas where you can free up funds. This could go a long way towards helping you build a robust financial safety net.
You may have already created a list of “non-negotiables” and “nice-to-haves”, which is a great start. If you made this list a while ago, though, now may be a good time to reassess. Proactive budgeting means assessing your real spending throughout the year and tweaking your budget as needed to ensure there’s room for events you didn’t expect.
For instance, as you pay off debt or your income increases, you can allocate those funds elsewhere in your budget, such as into an emergency fund.
The power of an emergency fund
Think of your emergency fund as a financial safety net – a readily accessible pool of money you have set aside for unexpected expenses.
Ideally, your emergency fund should cover at least 3 to 6 months of essential living expenses. Remember, this doesn’t necessarily need to cover your entire monthly income, just your living expenses. So, if your essential expenses come to £2,000, your emergency fund should ideally be between £6,000 to £12,000.
Keep in mind that as the cost of living increases, you may need to add more to your emergency fund. For example, MoneyAge reports that, between April 2022 and April 2024, the cost of three months’ worth of essentials increased by £1,028 on average. This means you may need to consider reviewing your budget to get an accurate sense of what your expenses are in real terms.
Though it’s also wise to explore long-term protection options such as income protection, having an emergency fund in place means you can cover expenses in all manner of situations, not just if you’re ill.
What’s more, your fund could save you from having to dip into investments or, if you’re over the age of 55, your pensions, which could affect their long-term growth and potentially jeopardise your future financial security.
Protection can act as a financial security shield
On top of having an emergency fund, insurance could help cover you in the event of the unexpected, and some can address specific concerns. Here are a few examples.
Buildings insurance
Buildings and contents insurance can cover you in the event of a fire, natural disaster, or theft. A tree falling on your roof could be costly to repair, but this should be covered by buildings insurance – meaning it isn’t necessarily something you need to be concerned about. If you had a leak from general wear and tear, you may be out of pocket.
Income protection insurance
Income protection replaces a portion of your income if you’re unable to work due to illness or injury, so this can be particularly useful if you’re concerned about being unable to work.
Most policies have at least a four-week deferment period, where you have to wait for cover to kick in. Typically, the longer your deferment period, the cheaper your monthly premiums will be. So, in this case, having that emergency fund in place could still be helpful to bridge the gap.
Critical illness cover
Critical illness cover is designed to pay a lump sum if you are diagnosed with a serious illness or injury. You could use this money to cover medical expenses, daily living costs, and mortgage or rent payments. This could give you some financial leeway to recover and remain financially stable if you need to take time off work.
You can also combine income protection and critical illness cover for a robust protection portfolio, giving you the flexibility you may need in an emergency.
Obtaining financial advice could help you build a robust financial emergency plan
Because everyone’s circumstances are unique, you could benefit from getting expert financial advice when building a long-term emergency plan for your money. Whether that’s getting a bespoke protection plan or discussing how to build a buffer into your savings, getting professional advice could be invaluable.
A financial adviser can help create a personalised plan that addresses your specific needs, ensuring you’re prepared for whatever life throws your way.
This is something we can help with.
Get in touch
If you want to ensure that your financial safety net is as strong as it can be, then we’re here for you. We can help you build a solid financial plan that not only covers you for financial emergencies, but supports your long-term financial goals.
Email enquiries@jesellars.co.uk or call 01934 875 919 to find out more about how we can help you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
