5 ways to ‘emergency-proof’ your budget

We’ve all experienced it at least once – that sickening feeling when an unexpected expense crops up and we simply don’t know where we’re going to find the money to pay it. It might be a mechanical issue with a car, unforeseen and urgent house repairs, or a sudden loss of income we weren’t banking on.

Nothing is more destabilising than a financial emergency you’re unprepared for, which is why having a series of systems in place to ‘emergency-proof’ your household budget is one of the best things you can do for both your peace of mind and your financial future.

Of course, finding the extra money to save in 2024, particularly in this financial climate, is easier said than done.

The cost-of-living crisis means we’re paying more at the supermarket, at the petrol station and for basics like utilities than ever before, and a steep increase in mortgage repayments has been passed on in the form of higher rents as well.

In short, just when we need the extra money the most, it’s funnelling out in every direction.

“We’re hearing from more and more people that the increasing cost of living is really hurting them,” explains Jen Richardson, founder and director of Got Money Honey, a women’s financial literacy initiative.

“They feel like they’re just being hit from all angles, and while a lot of people seem to want to just throw their hands in the air and give up, that’s the opposite of what we should be doing, even though we can all acknowledge how challenging it’s been.”

That said, there’s no avoiding the fact that the financial landscape seems rocky for the foreseeable future, and with interest rates not looking like decreasing any time soon, we’re all going to have to boost our buffer of savings for price increases and unforeseen emergencies.

“It’s precisely in times of financial hardship that re-strategising and creating some healthier financial habits can feel most empowering,” explains Richardson.

“If you set your mindset to a belief that you can trim the fat and set up a savings or investment plan that will strengthen your financial position, then the stress created by things like your mortgage repayments going up or your car breaking down can be minimised. Sure, no one likes having to dip into their pocket to pay for something boring like a new roof, or to pay more money to the banks in interest, but it’s a much better option than having to spend on credit or go further into debt in order to meet your financial requirements.”

So, when grapes cost just shy of $20 and the Reserve Bank is threatening to push interest rates up even higher, what is the trick to saving money in 2024?

“There are a number of ways you can do it,” says Richardson, “and I find one of the simplest ways is to start focusing on the little savings you can make, instead of the big ones.”

The first step, says Richardson, who has been helping Australians emergency-proof their budget and increase their financial literacy for decades, is to be honest with yourself about your incomings and outgoings.

“A lot of people have a kind of ‘bury their head in the sand’ approach when it comes to their budget,” she says.

“They come to us and say ‘I live week-to-week, there’s no room in my budget to save,’ and I’m sympathetic because I know it’s difficult, but when we sit down and go through things item by item, there are inevitably a lot of things we can work on to start boosting those savings. So, the first step is getting really honest with yourself about your spending and knowing exactly where your money goes each week.”

“I love online shopping,” says the money coach, “because you can always see the exact dollar amount of what’s in your cart. You go into a store and put things in your trolley and you have no idea how much it’s going to cost until you get up to the till, by which case it’s too late. Online shopping is a simple way to reduce your weekly grocery shop.”

“It might not seem like a big, fancy change to make, but it can add up,” explains Richardson. “It doesn’t matter whether you used them today or in six months, canned tomatoes are canned tomatoes. So, buy them when they’re $1.20 rather than $2. The savings will begin to add up over time.

It seems obvious, but moving the money you save out of your regular account and into one that is more difficult for you to access is essential if you want to see any growth in savings. Otherwise, those savings will go straight back into the pot and find a home in another expenditure.

While finding ways to cut back on your spending is one way to boost your savings, another (often much quicker) way to do this is to find an extra source of income. Whether that means selling things on Facebook Marketplace, picking up an overtime shift, taking on a side hustle or asking for a pay rise from your boss, finding a way to increase your monthly income will allow you to put the extra directly into savings, without having to change your lifestyle dramatically.