# Six ways to prepare for a personal finance crisis
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-25
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Six Ways to Prepare for a Personal Finance Crisis
Meta Description: Discover six essential steps to safeguard your finances from unexpected emergencies, including creating an emergency fund and learning how to budget
URL: https://financedigest.com/six-ways-to-prepare-for-a-personal-finance-crisishtml

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Whether it’s a sudden loss of income, a medical expense, or damage to your car or home – there are a lot of ways that a personal finance crisis could arise. In fact, many have already found themselves facing financial difficulties due to the COVID-19 global pandemic over the last two years. Although there’s no one-stop solution, there are measured, proven and reliable steps to take ahead of time to ensure that if a personal finance crisis arises, you’re as best prepared as possible.

To ease the impact of sudden expenses, Emma Keywood, Senior Marketing and Product Manager at Dodl by AJ Bell ( [www.dodl.co.uk](http://www.dodl.co.uk/)) has listed six ways to prepare for a personal finance crisis.

**Start an** [emergency fund](https://www.financedigest.com/where-can-you-start-building-your-emergency-funds.html "Where Can You Start Building Your Emergency Funds?")

In the event of a personal finance crisis, day-to-day [living costs](https://www.financedigest.com/indefensible-uks-sunak-under-fire-over-response-to-cost-of-living-crisis.html "‘Indefensible’: UK’s Sunak under fire over response to cost of living crisis") can become incredibly hard to stay on top of. Your income might have stopped, but bills won’t. By starting an emergency fund, or a ‘rainy day fund’ as some say, you can build a [safety net](https://www.financedigest.com/ecb-weighs-bigger-rate-hike-with-safety-net-for-indebted-countries.html "ECB weighs bigger rate hike with safety net for indebted countries") in advance, keeping it in a dedicated account to reduce temptation to spend it. To ensure you can [access this money](https://www.financedigest.com/accessing-government-money-if-youre-self-employed.html "Accessing Government Money if You’re Self-employed") quickly, an easy-access cash account would probably be a smart place to keep your emergency fund in..

**Build a nest egg**

[Investing doesn’t need](https://www.financedigest.com/the-six-things-you-need-to-consider-before-starting-or-investing-in-an-ico.html "The six things you need to consider before starting or investing in an ICO") to be scary. You can start from as little as £100, then add as little as £25 per month. By the [end of the year](https://www.financedigest.com/equity-markets-show-strong-end-of-year-performance-in-camradatas-q4-2017-investment-research-reports.html "Equity Markets Show Strong End of Year Performance in CAMRADATA’s Q4 2017 Investment Research Reports"), your initial £100 payment could have significantly increased. Building a nest egg in a tax-efficient ISA is a great [way to give yourself a little bit of added security if you ever find yourself facing a crisis](https://www.financedigest.com/5-ways-to-support-your-employees-during-the-cost-of-living-crisis.html "5 ways to support your employees during the cost of living crisis "). Equally, the money can be left for a future holiday, retirement fund or a [house deposit if a crisis](https://www.financedigest.com/biggest-uk-house-price-fall-recorded-since-financial-crisis.html "Biggest UK house price fall recorded since financial crisis") simply never arises.

**Learn how to budget**

It might seem like a [waste of time](https://www.financedigest.com/office-workers-waste-more-time-on-slow-tech-than-they-spend-on-holiday.html "Office Workers Waste More Time on Slow Tech Than They Spend on Holiday") but monitoring your income against your outgoings as closely as possible makes budgeting a walk in the park. It can be surprisingly easy to let memberships and subscriptions pile up and before you know it, you’re spending up to £100 a [month on services](https://www.financedigest.com/more-than-half-52-of-cisos-are-prioritising-gdpr-compliance-over-the-next-12-months-new-data-from-the-2017-financial-services-information-security-network-shows.html "More than half (52%) of CISOs are prioritising GDPR compliance over the next 12 months, new data from the 2017 Financial Services Information Security Network shows") that you don’t use. [Keep track](https://www.financedigest.com/will-mays-new-minister-percy-keep-the-northern-powerhouse-on-track-post-brexit.html "WILL MAY’S NEW MINISTER PERCY KEEP THE NORTHERN POWERHOUSE ON TRACK POST BREXIT?") of as many payments as possible, whether it’s using a spreadsheet, a notebook or even the Notes app on your phone. You can take budgeting a step further and break down the different expenses each month – bills, food, services, etc. – to see where you could be [saving money](https://www.financedigest.com/money-saving-hacks.html "Money saving hacks"). Having a better grasp of your outgoings will also mean you can calculate how much of your income you’re able to [save each month](https://www.financedigest.com/brits-saving-less-than-ever-only-50-add-to-savings-each-month.html "Brits Saving Less Than Ever: Only 50 % Add To Savings Each Month").

**Keep on [top of debt](https://www.financedigest.com/portafina-shares-top-tips-on-how-to-ditch-debt.html)**

If you have lots of different types of debt, such as with buy now, pay later schemes, [credit cards](https://www.financedigest.com/uk-credit-card-borrowing-rises-by-most-since-2005-boe.html "UK credit card borrowing rises by most since 2005 – BoE"), mortgage payments and personal loans, considering consolidating as much debt as possible into one place. This will allow you to control the level of interest that you’re paying, plus it’s much simpler to plan exactly how you’re going to [reduce the level of debt](https://www.financedigest.com/thames-water-reduces-bad-debt-11-in-a-year-with-fico-system.html "Thames Water Reduces Bad Debt 11% in a Year with FICO System"). Keeping on top of two, three, four or more forms of debt in different places is hard to sustain. Additionally, it’s always worth making an effort to [repay credit](https://www.financedigest.com/credit-suisse-to-repay-further-750-million-to-greensill-linked-fund-investors.html "Credit Suisse to repay further 0 million to Greensill-linked fund investors") cards each month and budgeting accordingly so you’re able to do so.

**Don’t overextend on your mortgage**

Be realistic with your mortgage. Make sure that the monthly [payments are affordable and realistic for you so that you don’t end](https://www.financedigest.com/the-end-of-payments-as-we-know-it.html "The end of payments as we know it") up wondering how you’re going to keep up with the costs. If you’re currently looking for a new home or planning on doing so in the near future, make a list of your essentials or “must-haves” in a home and strictly look for [homes in your price](https://www.financedigest.com/uk-home-asking-prices-rise-tax-cuts-to-spur-demand-rightmove.html "UK home asking prices rise, tax cuts to spur demand: Rightmove") bracket. The further you stray away from your budget, the [harder a potential personal finance](https://www.financedigest.com/1-in-3-uk-businesses-looking-for-finance-are-finding-it-harder-to-get-a-loan.html "1 in 3 UK businesses looking for finance are finding it harder to get a loan") crisis will be to deal with.

**Have a plan**

Make a [plan for what you might need to do if a crisis](https://www.financedigest.com/exclusive-germany-prepares-crisis-plan-for-abrupt-end-to-russian-gas-sources.html "Exclusive-Germany prepares crisis plan for abrupt end to Russian gas – sources") occurs. Such an event could be overwhelming to handle, with feelings of anxiety, doubt and fear creeping in. With a solid [plan that you can stick](https://www.financedigest.com/oil-prices-take-a-breather-opec-sticks-to-output-plans.html "Oil prices take a breather, OPEC+ sticks to output plans") to, those feelings can remain at the back of your mind. Of course, a financial crisis will likely be stressful, but knowing how you plan to respond to the situation, stay afloat in the short-term and make your [way back](https://www.financedigest.com/5-ways-to-sustain-productivity-when-the-clocks-go-back.html "5 ways to sustain productivity when the clocks go back") to a place of stability will make the situation a lot easier to navigate.


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