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Living on a debt solution

How much should I put aside for sundries and emergencies?

Posted 10 September 2016 by Christine Walsh

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Having an emergency fund is great but not everybody should be saving the same amount. Read on to learn more.

We all know that it’s a good idea to put money aside for the unexpected things that come along in life. Your sundries and emergencies fund is an important part of good money management, but how much should you put aside each month? And can you still save for this if you start a debt solution? We’re here with the answers. 

What counts as sundries and emergencies?

Sundries are small infrequent costs that crop up from time to time – things that you can’t really predict but which might still end up costing you money. Say you need to buy a few small household items, like cutlery, pans or lightbulbs – these would all be classed as sundry costs. And we’ve all been faced with an emergency before – that horrible sinking feeling you get when the boiler breaks or the car won’t start. 

These can hit any of us at any time and can mean it’s not always possible to know exactly how much you’re going to spend over the month. You’ll definitely enjoy a lot more peace of mind knowing you’re got something put away for these sorts of things.

 

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How much do I need?

If you look around at the advice for how much you should save for emergencies, it varies quite a lot. Some people say that you should have a few hundred pounds put away and some that think you need thousands of pounds to cover you if you’re hit with a big financial emergency like losing your job. 

How much you should be saving just depends on your circumstances – it’s not going to be same for everybody. In order to know how much you should be saving, you need to put together a comprehensive budget. If you know what’s going on with your budget, you’ll know how much Disposable Income (DI) you have. This is the money left-over after you’ve covered your outgoings. 

How much DI you have will tell you how much you can save each month without putting yourself in a worse position. If you’re on a debt solution like a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA), your DI will be used to repay your debts.

Should I always be saving for a rainy day?

If you have debts and saving would mean you can’t afford your repayments, put your debt repayments first. This is better for you in the long run because it means you won’t default on the account and damage your credit history. 

It’s also best to put debts first because you’ll be charged a higher rate of interest on the money you’ve borrowed than you’ll be earning on the money you’re saving. So in the long run it will save you money to pay your debts off first. 

If it’s possible for you to save a little each month and manage your repayments, this is a good situation to be in. Just make sure that you’re not jeopardising an important payment like your rent, utility bills or council tax just to save for the unexpected. 

 

Can I have a sundries and emergencies fund on a debt solution?

At Debt Advisory Centre, we speak to a number of people who are concerned that they won’t have any money to cover them for sundries and emergencies if they start a debt solution, but this isn’t the case. 

When you’re on a debt solution, your budget is worked out in a certain way so you can put the maximum amount of money towards your debts and still afford everything you need. Part of your income will be put aside for sundries and emergencies – it’s all accounted for in your budget. 

Of course, it’s impossible to predict exactly how much any given emergency is going to cost you. It’s possible that a big unexpected bill could come along and you haven’t had enough time to put money aside to cover it. If this happens, don’t worry. All you need to do is contact your debt solution provider and explain the situation to them. It may be possible to arrange lower payments on your solution or to go on a payment holiday. This may mean that your solution lasts longer than first expected but it will mean you’re able to afford everything comfortably. 

So do you have a sundry and emergency fund started? If you don’t and starting one won’t put you in a worse position with creditors, it’s a good idea to start putting a little something aside. 

If you’ve got debt and you’d like more advice on how to manage your money, use the options on the left to get in touch with an advisor. 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.