Avoid money worries with these five tips

There are numerous reasons why your life can head in an unexpected direction, but to ensure it isn’t a turn for the worse, you should be well prepared financially. These tips will help you to avoid financial bottlenecks:

Tip 1: Set aside three to six months’ worth of salary

As a general rule of thumb, you should set aside at least three to six months’ worth of salary as a backup when you have the means. This will give you enough flexibility to find a new job or transitional work once you’ve been dismissed, which will in turn cover your ongoing costs. In addition to this backup, you should also set up an emergency account where you save money for unexpected things such as car repairs, doctor’s bills or hospital visits. This will leave you well protected against the unpredictable.

Tip 2: Keep a book of household accounts

A household account book is an indispensable tool for controlling your finances. Use it to make a note of all income and expenses. This will give you a clear overview of your money and consumption habits, and will help you identify potential savings. It’s always a good idea to draw up a budget plan so that you can avoid financial problems. In our blog post “Saving money: a comprehensive guide”, you’ll find savings tips and recommendations on how to create your personal budget plan.

Tip 3: Avoid living extravagantly

If it’s security you’re after, don’t make the mistake of living too extravagantly. In other words, try not to get used to a luxurious lifestyle you can barely afford. This doesn’t mean counting every penny and denying yourself all treats. However, you should learn to value money and property and to manage them carefully.

Live in a way that means you don’t need to spend your entire salary every month for your standard of living. This will ensure you aren’t jumping in at the deep end if you don’t manage to find a new job right away after a dismissal, if you have to quit your current job for personal reasons or if you just want to treat yourself to a break for a career change.

Tip 4: Appreciate what you have

Watch your consumer habits: we often buy things just because we fancy something new, losing sight of what we’ve already got. If we learn to appreciate and look after the things we own, they will last longer, and this usually costs less than buying new things all the time. For instance: 

• Look after your car. Have it serviced on a regular basis. Drive carefully to avoid accidents and to keep your car in good condition. Use public transport for short journeys, and only drive if you’re going on long journeys.
• Treat your clothes with care to avoid any unnecessary wear and tear. Many items of clothing can be repurposed or reused. You could, for instance, use old clothes when you’re gardening. Keep your wardrobe neat and tidy. This will prevent anything getting lost, and you’ll see all your clothes at a glance.
• Keep track of all your supplies and actually use them up. It’s hard to create cash reserves if you go on big shopping sprees every day. Be creative and come up with recipes using ingredients you already have at home.
• Check insurance and contracts/agreements once a year, e.g. health insurance, household contents insurance or your phone contract. Make changes if need be, or switch providers. You’ll often find you can save a lot of money. Online platforms are a really easy way to compare deals. 

Tip 5: Be careful about what you buy

In addition to doing without purchases, being more careful about what you buy can also help you to reduce expenses and create cash reserves.

• Sleep on every big shopping trip. Wait at least a day and be honest with yourself: do I really need that? You’ll be amazed how many times the answer to this question is “no”.
• Find out all you can about a given product before you buy it. It is an especially good idea to compare prices and features if you’re buying expensive items. Do I need all the features of this new TV? Is it worth buying an older washing machine model, or does it consume more electricity? Could I share a lawnmower with my neighbours? Maybe rent a drill? Or perhaps I could buy the new dining table second-hand? There are even ways to be more careful when it comes to smaller purchases: ask for beauty product samples, borrow sports equipment from a friend to try it out before you buy it, and try to do without things you hardly ever need. 
• Only go to restaurants on special occasions; don’t make it a habit. Try to cook with food you already have at home.
• Look for cheaper alternatives before you decide on buying something expensive. Take beauty products, for example. You don’t always have to buy the most expensive brand. Inexpensive products from retailers will often be just as good as branded products. 
• Pay bills on time or by direct debit. Having to spend money on overdue payment fees is a nuisance and unnecessary.

What to do in a financial emergency?

Are you already in a financial bottleneck and don’t know how to bridge it? Financial difficulties can affect anyone. If you’re unable to pay your bills on time, it’s important to stay calm and take a systematic approach. 

Taking out an instalment loan to bridge a financial bottleneck is not a good idea. While they may provide short-term relief, loans of this kind have risks. The additional financial burden of interest and repayment can worsen your financial situation in the long term, in particular if the underlying causes of the bottleneck aren’t resolved.

Instead, you should look into all possibilities for reducing your expenses and increasing your income. Here are some practical recommendations that can help you:

Pay essential living costs first

The first and most important step is to gather all outstanding payments together. Draw up a list of all open invoices, their due dates and amounts. This will help you assess the urgency of each payment and set priorities. To begin with, concentrate on essential living costs. These include:

• Rent
• Electricity and heating
• Internet and telephone
• Health insurance
• Groceries

Pay these bills first and budget an amount for household purchases. If you’re unable to pay bills such as rent, electricity, Internet and health insurance, you should seek solutions proactively:

• Contact your landlord and ask for a deferral, i.e. a postponement of payment, or payment by instalments.
• Talk to your energy supplier about paying your electricity and gas bills in instalments.
• Ask your bank about options for temporarily deferring credit card payments.
• Check whether you can pause or cancel contracts such as mobile phone or streaming services.

Important: late payment carries the risk of cancellation of the contract. Contact your creditors in good time with a view to finding solutions together. An exemption from premiums is usually better than cancellation, as the contract and the insurance cover remain in place. Payment deferrals or alternative agreements are often possible. This will give you time to improve your financial situation. 

Suspend savings instalments

If you’re having difficulties making payments, it may make sense to temporarily suspend regular savings instalments. Although long-term savings are important, paying urgent bills takes precedence. Once your financial situation has stabilized, you can start saving again. If you make monthly payments into your retirement plan or a life insurance policy, you can pause your contributions temporarily and resume them later. 

Scale back your variable expenses

Review your expenses with a critical eye and identify items where you can make savings in the short term. This might mean for example not going to restaurants and cooking at home instead. Pausing streaming subscriptions or taking advantage of cheaper shopping alternatives can also help to reduce your spending.

Think about where you might make small adjustments to create more financial room for manoeuvre in the long term. Every saving counts and helps to improve your financial situation.

Look for a job on the side to bridge the gap

A temporary job on the side can help you generate additional income and close the gap in your finances. Look at options such as freelance work or part-time jobs that are flexible and compatible with your main job. There are many platforms that are specifically geared towards side jobs.

The part-time job should help you to quickly resolve the financial bottleneck. If you’re employed, make sure that the income from your secondary employment is transparent. In most cases as an employee, you’re obliged to inform your employer about any additional employment and to obtain confirmation in advance. 

Discipline and patience pay off

Remember that financial bottlenecks are often temporary. With the right strategies and a little perseverance, you can overcome these challenges and resolve your money worries.

Don’t hesitate to seek professional help if you feel that the situation is overwhelming you. There are debt counselling agencies and financial experts who can provide you with advice and support. Stay positive and focussed – with the right approach, you’ll overcome this difficult time and come out stronger.