Contents.
What is a financial cushion?
A financial cushion is a reserve stock of money that helps you survive difficult periods in life without having to take out loans or borrow from friends. Such a reserve allows you to maintain your usual standard of living for a certain period of time, even if the main source of income is temporarily absent.To calculate the optimal amount of the reserve, you should take into account your monthly obligatory expenses and multiply them by 3-6 months. For those who have an unstable income or are self-employed, it is advisable to increase this period to 9-12 months. It is important to understand that the greater the financial responsibility (family maintenance, mortgage, own business), the larger the reserve should be.
How to effectively build a financial cushion
To accumulate the required amount, it is not enough to simply save what is left at the end of the month. You need a systematic approach. The most effective way is to automate the savings process through an app. However, if your mobile app doesn't have such a feature, you can simply open an additional debit card and regularly transfer 10% of any amount credited to your account.
It's worth reviewing your daily expenses and looking for opportunities to save money:
- use of cashback programmes and bonuses from banks;
- reducing the cost of delivering ready meals and cooking at home more often;
- planning large purchases for the period of sales;
- avoiding impulse purchases.
An additional source of replenishment can be monetising a hobby or a part-time job in your spare time.
Where to keep a financial safety cushion
To keep your funds with benefit, you should place them on a deposit. Globus Plus offers favourable conditions for placing funds through the app.
Main advantages of deposits from GlobusPlus:
- profitable interest rates: up to 13.5% per annum in hryvnia and up to 3% in US dollars;
- possibility to replenish deposits at will;
- monthly interest payments;
- minimum amounts for opening an account;
- automatic deposit prolongation.
Opening a deposit through GlobusPlus takes just a few minutes. All you need to do is download the app, go through verification, and choose the desired programme. The registration process is completely remote, without visiting a branch. Despite the effectiveness and profitability of keeping a strategic reserve on deposit, it is recommended to accumulate part of the funds (about 20% of the total amount) in cash and keep it at home for emergencies.
How to maintain a financial cushion
Creating a reserve is only half the battle. It is important to update it regularly and replenish the funds you have used. You should regularly review your expenses and optimise them.Financial experts suggest using different schemes to save more efficiently. The most popular of these is the 20/80 option, where 20% of any income is put aside in a ‘long drawer’ and 80% is spent on current needs.Those who are prone to impulsive purchases should try the ten-second rule. According to psychologists, this is enough time to think about whether you really need to spend money on something.
Mistakes in the formation of a financial cushion
Many people agree that a financial cushion is very important, but when dealing with this issue, they make common mistakes that reduce its effectiveness.
Here are some of them:
- Setting aside an insufficient amount.Some people believe that a little money for a rainy day is already an airbag. In fact, not having enough money saved limits your options in the event of a major change, such as a job loss or sudden expense.
- Keeping money in unreliable assets. Investing in risky assets seems attractive because of the possibility of additional earnings, but in reality it can lead to losses.
- Using savings for daily expenses. You should not spend part of your reserves on everyday expenses, thinking that it will be easy to restore the balance in the future. The money should be untouched until the moment of real need.
A financial cushion should be part of the budget, and its creation should be a regular habit. This way, it will provide confidence and financial stability at the right time.
