Why it's important to build a financial safety net
Having a financial safety net is important, but saving up can be hard - we reveal how many people struggle to save for a rainy day fund, plus tips for saving.
Managing personal finances is an important part of the journey towards financial stability. But at Lowell, we understand that it’s not always straightforward, and people can sometimes struggle with the numerous tasks that come along with it. We’ve taken a look at some of the financial goals that Brits struggle with, as well as some top tips to help make those goals a little bit more attainable.
The financial goals people find hardest
We conducted research to find out what tasks people find hardest when it comes to personal finance. Our survey revealed that the thing people find hardest is building up a financial safety net to fall back on if needed - 66% of Brits struggle with this. No matter what financial situation you’re in, having a safety net is important, but for lots of people, it’s a hard goal to reach.
Our survey also reveals that it’s this kind of large, long-term saving that causes people problems. Other financial tasks that people struggle with including saving for specific long-term purchases (60% of Brits find this difficult) and saving up for experiences and activities (52%).
What is a financial safety net?
A financial safety net is a pot of money that you use for emergencies or unexpected circumstances, like a rainy-day fund. It’s a good idea to try and build one up for unforeseen expenses, such as car repairs, boiler repairs, vet fees, or even the case of losing your job. It’s recommended that a good safety net is equivalent to 3-6 months of your standard expenses. But for a lot of people, saving that much can be very difficult.
If you’re dealing with debt or other personal finance issues, saving for a financial safety net can seem daunting. If you have debt that’s managed by Lowell, we’ll always work with you to help you on your way to financial freedom. We’re here to support you – our goal is to help you settle your debts. Once you’ve cleared your debts, you can focus on creating a financial safety net and saving for the future.
Tips to help you build a financial safety net
We understand it can be challenging to build a financial safety net, especially if you’re struggling with problem debt. To help, we’ve put together a few basic tips to help you start building a financial safety net.
Prioritise your debts
Paying off your excess debt is an important first step towards financial stability. Use free tools like our budget calculator to work out how much you can afford to pay back towards your debts each month.
Although a savings pot of three to six months expenses feels quite overwhelming, remember it’s an ‘end goal’. Even amounts that seem small at first will add up over time, and before you know it, you’ll be much further along the line than you would have thought.
Prioritise needs, wants and savings
When looking at how much you can save, get into the habit of understanding your needs and wants. List out your absolute necessities, your wants, and your luxuries. Then you can get a real clear idea of what you can put away each month.
Do a financial spring clean
Look at all your incomings and outgoings, and see if you can cut any, combine payments, or reduce anything. Take a look at where most of your money is going each week and see where you need to reduce your spending. Our budget calculator is a great tool to help you do this.
Make your money work harder
More than half of the people we surveyed (59%) also thought it was difficult to find a way to make more money from savings and assets in the future. The rise of open banking makes it easier to work out how to make your money work harder – that’s why Lowell have partnered with the money management app Snoop.
Snoop is an app that keeps a watchful eye on your finances, and helps you to spot opportunities where you could be saving money or paying less on big bills. Getting on top of your finances can seem complicated or time-consuming, but apps like Snoop make it easier to manage your money, simplify your finances, and spot saving opportunities at a glance.
You can connect all of your bank accounts and credit cards, and see all of your financial information in one place. If Snoop’s smart finance technology spots that you’re overpaying and there’s a cheaper deal if you switch to a new provider, it will let you know. By making small changes to your monthly outgoings, you may be able to save more money and find it easier to reach your financial goals.
Lowell are here to help you on your way towards financial independence. If you’re worried about being able to save while working with Lowell, check out our next steps to find out how we’ll work with you. Or get in touch and find out how we can help you to clear your debts.
Published by Libby Davies on 09th August 2021