How to build your financial cushion

Don't let unforeseen events change your financial plan or ruin your day

Home > Blog > How to build your financial cushion

22.Dec.2021

The first step toward financial peace of mind is making sure that you can cope with unexpected expenses without disrupting your overall financial plan. It all starts with your emergency fund:

¿What is an emergency fund?

It’s money saved for unexpected expenses, such as having to replace an appliance.

What is it for?

In order not to go into debt or alter your savings plan due to unplanned expenses. This way you can have peace of mind.

How much money should you put in?

3 to 6 months of your fixed expenses. From there, put in the amount you feel confident with.

How to build your emergency fund

Step 1. Calculate what your monthly fixed expenses are. You can make a personal budget to find out.
Step 2. Multiply that number by 3 and by 6. This way you will know what your goal is.
Step 3. Calculate how long it will take to achieve your goal with your current savings. Save at least 5 % of your salary.

Remember: the more you save, the sooner you will reach your goal.

How to make the most of your cash

And the fact is that, with high inflation rates, your emergency fund savings lose their value month by month. In other words, this money is worth less over time as the cost of living rises. Is there anything that can be done? To begin with, do not lose sight of the...

What should you do with your savings in a recession?

However, the actual fall in the Eurozone was 0.1% in both the last quarter of 2022 and the first quarter of 2023, closer to zero growth than to a sharp economic contraction. In Spain, the GDP has not fallen since the first quarter of 2022, but the fact that the German...

The power of automating your finances and certain habits

It's like a vicious circle that prevents you from moving forward. The reason for this is very simple: they are processes that depend on your willpower. Even when you build the right habits, it's easy to have slip-ups that undermine your confidence and make you feel...

Should you sell your investments to pay off your debts?

The truth is that there is no one-size-fits-all answer. The most appropriate solution will depend on both the type of debt and your investment profile, which will determine to a certain extent the returns you can achieve with your investments. Safe profit vs....

Why is everyone talking about Treasury Bills?

The reason for this Treasury Bill frenzy involves a combination of factors. On the one hand is the rise in interest rates by the European Central Bank (ECB) to combat inflation, which caused the yield on public debt to rise to levels that became attractive to savers....

Passive income: what is it, how does it work and what’s the truth about it?

You can start generating it as a plan B for your finances or a supplement to your salary and, with luck and if you do it right, you can even live off it. If you still don't know what it is, how it works and the reality versus the fiction, we'll tell you all about it....