Living On A Knife Edge

Are you living on a knife edge ? Am I living on a knife edge ?

Living on a knife edge

A recent Yougov survey in the UK which sampled 7,500 families revealed that 44% of families only have enough savings to pay for one months rent or mortgage if they were to lose their jobs.

29% of families would not be able to pay their immediate months rent or mortgage if they were to lose their jobs.

Thats Scary !

Examining my own position, I would just about be able to manage as my wife earns a decent income, but if we were both to lose our jobs then we would be in serious doo doo

At the beginning of my process of paying off my debts and climbing out of a financial hole I saved up £1,000 to act as an emergency fund. This was to act as a buffer between my income and outgoings, to cover me if I ran short one month, and to stop me from falling back on my credit cards if times got tough.

Last month – times got tough, and I burnt through my £1,000 and some more – which sadly hit the plastic to the tune of £450 (ouch)

I know feel so dumb.

Even though I’ve got a good couple of months coming up, I now have to make up my £1,000 buffer and repay the £450 to the plastic.

So the answer to the question I posed above

Am I living on a knife edge ?

then the answer has to be a most definite YES

Over the coming weeks once I’ve repaid the cards and the £1,000 into my emergency fund I need to start building up my emergency fund to something more meaningful.

In the past, I would have no problem with just hitting the plastic, and then not bothering to repay the balance, just ticking off the increased minimum repayment each month.

Nowadays the new “improved” me has begun to develop a dread of plastic and I’ve got no intention of falling back into the old habits which have landed me in this mess in the first place

Being self employed has great benefits to my life. However – the MAJOR downside is the lack of income stability.

I think the only way to get rid of this downside is to build up a higher cash reserve in my business accounts so that i can pay myself more consistently and to increase my personal cash emergency fund to at least £3,000

Now that the balances on my credit cards are consistently falling, my credit limits are being increased – in some cases by nearly 100%. I’ve now got capacity to borrow a further £10k on the plastic if things get really bad, but that would be like taking one step forwards and then 100 steps back.

I aint going there !

Are you living on a knife edge with regards to your lack of savings ?

If your honest answer to this is yes, then its time to consider taking steps to re-organise your finances, write a spending plan and start to save for the future.

Comments

  1. Hi Mike,

    I would not sleep at night without an emergency fund to cover a year or so of my expenses. So, no I’m not living on a knife edge on that regard, but on other maybe yes.

    Anyway, I would avoid credit card debt.
    Look for other cheaper way to get money, if really needed.

    Cheers

    -Robert

    • getrichwithme says:

      Hi Rob,
      I picked up my card debts when setting up my business a few years ago, but never got round to paying off the balances – just the minimum payment routine.
      I’m now paying down my debts, but finding the balance between a big enough emergency fund, and using spare cash to pay down debt is more difficult than I thought

  2. We are not living on a knife’s edge: we used to. Then we paid all consumer debt and have enough cash to go for over a year. I am not calling it ‘emergency fund’ though – keep so much money not doing anything is not smart. It is just that this is the money we have in an ISA and can be taken out if there is a need; or a great investment opportunity.

    • getrichwithme says:

      Its a painful process paying down consumer debt and its a tremendous achievement for someone who is “up to their neck in it” to become debt free.
      I should really have my debts marked down as business debt rather than consumer debt and deal with it through my business accounts, but when I set up in 2008 there was no business finance available – so it sits on the consumer side of the fence.
      I’m looking forwards to my debt free day – this blog and supportive comments like yours are helping me get there

  3. Plastic sure got me into spending trouble years ago. That’s why I swore off credit cards and went only to cash or debit cards for payments. When we did that our spending decreased significantly and our savings rate skyrocketed. In a matter of a few short months we had plenty of reserves in our emergency fund. You can get there…just takes discipline.

    • getrichwithme says:

      I tried the Dave Ramsey principle of saving up an emergency fund of £1000 and then concentrating on paying off debts. However I now know that i need more than £1000 in reserve as my income from self employment fluctuates too much. I’ve now made over repayments on my debt every month since I started this lifestyle change 9 months ago and its giving me great satisfaction to do so. I’m just annoyed that I had to hit the cards last month in order to make ends meet again.
      Moral of the story – WORK HARDER !

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