Money Talks: The three simple steps to financial security

This year has shown us that nothing is certain, which is why it's so important to have a grasp of the figure you need each month to afford the basics of your life.

We should all know exactly how much our lives cost.

I hold a senior management role in the hospitality industry and have been out of work for the past 18 months. Unfortunately, I had no savings at all to fall back on and really struggled to live on the PUP allowance. 

I am back at work now, but I am so worried that this will be short-lived. Have you any advice on how to perhaps prepare financially for another unexpected bout of unemployment?

Undoubtedly, this has been a hugely challenging time for those employed in your industry. It is so very difficult to experience such an unexpected immense change in your employment situation, leading to your income suddenly either reducing or stopping entirely, especially for such an extended period.

It is essential to have a few things in place to survive any possible financial hiccup you may encounter again, no matter what the reason may be.

Get to know your numbers

Are you are aware of exactly how much it costs to run your life a week, a month, or a year? Don’t forget to strip away those trips to Zara and the manicures! I am referring to the actual figure you need each month to afford the very BASICS of your life — food, utilities, mortgage payments, etc.

You really need to know where you are starting from before you can plan where you are going. Most people are totally unaware of their exact expenses. Nailing this is key before we move to the next step.

Emergency fund

Once you know your numbers, you can move on to the emergency fund. As you didn’t have one, RIGHT NOW is the time to address this. This is the fund that is essential to prevent the complete panic of “will I be OK?” if your employment situation suddenly changes again.

An emergency fund is essential for financial support in uncertain times. You should have at least three months’ worth of your basic financial obligations in this fund. This will mean the difference between a challenging time and a life-altering time should you find yourself out of work again.

Start small and build up to what you are comfortable with.

It is also very important to put this emergency cash in a dedicated, separate bank account, away from your everyday funds.

If you have any debts, stick with the minimum repayments for the moment and hold on to this cash until you have fulfilled the emergency fund.

Stick to a spending plan

Nobody wants to hear the word ‘budget’, but a good spending plan (that includes your core and discretionary expenses) will allow you to know when you need to pause your spending so you can start to save the excess cash.

For a few months, try to spend only on your core expenses and eliminate any non-essential spending. Review your recent credit card bills and try to identify any subscriptions and other expenses you can completely cut to free up more cash.

So, there you have it – three practical tips to secure your finances now so that, if anything unexpected happens again, you will have some peace of mind knowing what your figures are, having an emergency fund in place and sticking to your budget.

You will get through this and it is very important not let a fear of what the future holds blindside you and get you down.

If you wish to seek further guidance on your specific situation, you should contact a financial adviser.