Tuesday 5th of October 2010
Emergency backup funds could make life much easier if something unexpected crops up in the future that means your income is considerably reduced.
Information on individual voluntary arrangements (IVAs) could, however, be of great assistance if credit card debts have rendered your safety net insufficient.
According to a report from Scottish Provident, close to four million Britons would be unable to maintain their current standard of living for longer than six months if they could only rely on their emergency financial provisions.
Furthermore, the study showed 31 per cent of UK adults don't actually have any form of backup should they find themselves in an unforeseen situation.
And while 17 per cent would live off savings during an emergency, those who would have to rely solely on credit cards to fund their lifestyles would only be able to do so for a maximum of five months.
The firm adds that although plastic can seem to be a useful safety net, in reality it is a "false economy" as cards could lead to mounting debts that will only "add to your worries" during desperate times.
Researching IVA information may, however, show you there is a way to get rid of the money owed on unsecured financial products and free up enough income to start creating sufficient savings for the future.
The measure could get you out of the red after around five years - if you have the means and discipline to meet the reduced-rate monthly repayments required by the process.
Susan Barclay, head of marketing at Scottish Provident, comments: "As there are millions of Britons with less than six months worth of emergency financial provisions in place, it is clear that urgent action is needed, as well as a more realistic understanding about how you will survive should the main breadwinner become unable to work."
By Ashley Littley
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