How to Build Your Personal Rainy Day Fund
If this year has taught us anything, it’s that life can be pretty unexpected. This year, people have lost their jobs, dealt with major health issues, and even handled grief. No matter how much you planning, there is always something that can come up and interrupt your plans. It’s never too late to start a rainy day fund, and five tips to help:
1. Start a savings account.
If you don’t already have a savings account, contact your local bank and start one up. You can’t save money if you don’t have a place to put it. Many online savings account are free or with minimum requirements such as scheduled monthly deposits or having a small initial deposit to get started. Most importantly, go with the simplest option that comes without fees.
2. Budget for your rainy day savings.
As you plan your monthly budget, make sure you factor in your savings to see where you can adjust. You will have to take your money from somewhere, whether it’s your food or entertainment budget or cutting back on any unnecessary expenses.
3. Start in whichever way you can.
As you build your rainy day savings, focus on what you may need to afford later down the road. If you know that you will have to pay for a broken appliance or car repair, plan for those expenses and break down how much you’ll need to cover that cost. Every dollar adds up, even if it’s a small amount. You don’t want to eliminate any necessary living expenses, so be reasonable about how much you can afford to save right now.
4. Build the habit of saving.
If you aren’t used to saving money, getting used to the habit can be very difficult. It’s important to avoid spending money on things you can easily put towards your savings account instead. It can mean cutting into entertainment costs and getting used to simplifying your Friday nights. Right now, your goal should be to build the habit of consistently saving money. It will get easier over time.
5. Save more money as your finances improve.
Now that you are in the habit of saving money and your rainy day fund is looking pretty good take regular stock of your financial situation. How are things looking? If you get a raise at work or get a job with a higher salary, consider adjusting your budget to add more to your savings account. The last thing you want to experience is a rainy day without the funds to cover it. So, start today and set the right savings habit for yourself.