Shopaholic or struggling with a lifestyle change?
The perception of spending too much in the shops – or overspending – as the biggest cause of financial difficulties might be overly simplistic. New research from charity Consumer Credit Counselling Service in the United Kingdom suggests work issues – such as losing a job or having hours cut – is the main reason its clients get into debt. The yearbook figures show 48% of their cash-strapped clients cited work issues, in contrast to 10% who cited overspending as the cause of their financial trouble. The charity is trying to change the perception that debt is just caused by “going wild in the aisles”, and highlight the role a change in financial circumstances often plays.
How to build an emergency savings fund
The prominence of job losses, divorces or bereavements in the charity’s data highlight the importance of building a fund to call on in times of need. The emergency savings fund is sometimes known as “rainy day money”.
It is a cornerstone of personal finance – with billionaire Warren Buffett espousing their benefits in this year’s annual letter to investors. Experts suggest a readily-available fund of between three to six months wages. The exact amount will vary depending on personal circumstances such as if the individual has financial obligations, such as supporting family or paying off a mortgage.
The video tutorial How much should I be saving? talks through the steps of making a basic budget. It encourages saving regularly – even a small amount – to build the savings habit.