A rainy day fund is a type of emergency fund – money you have saved, but you hope that you don’t won’t need to use – because it’s there for unexpected circustances. These unplanned expenses include things lik medical costs, urgent repairs, unexpected bills or job loss.
One of the biggest misconceptions about rainy day funds is that you need to save thousands upon thousands of dollars each month but that really isn’t how it works. Typically, you only really need to save about 10-20% of your annual income. This is a doable amount, because it leaves you comfortable to cover rent or mortgage expences and the usual monthly costs. Daunting a prospect as it may be seen, it’s necessary. But it’s an understandably overwhelming feat. Start by thinking about what you can save in the first month. Even a small amount can make a substantial difference in the end. Here are a few steps that we think that any household could take:
1. Rethink Your Spending Habits
It’s high time for you to cut out all the unnecessary things you can do without. Ask yourself, do you really need to buy a coffee from your local cafe every day when you have your trusty coffee machine sitting on the kitchen counter gathering dust? Just fish out your to-go cup and start making your daily dose of caffeine from home. You’ll easily be saving anywhere from $3 to $5 per day! And while we’re by no means mathematicians, those figures surely add up!
Even the hobbies you pick may impact how you set aside some money in your savings pot. For instance, if you like playing online slots, you can easily find no deposit bonuses. These no deposit casino promotions are great because you don’t need to commit and use any of your money – and, best of all, you won’t be missing out on the overall gaming experience. Plus, there’s even a chance of winning some extra dough!
2. Set Budgets
Another pivatol step is planning and evaluating your budget. And this shouldn’t be a one-time thing. By regularly evaluating your budget, you can see exactly where your money is being spent and encourage yourself to be more frugal. You’d be surprised how being a little more vigilant can drastically improve on your financial habits.
In fact, doing this regularly to see where you’re spending money frivolously as mentioned in the previous point, is important. Before doing your weekly shopping at your local grocery store or supermarket, set yourself a budget on essentials to be used within a reasonable timeframe. Obviously, don’t deprive yourself of basic necessities. However, comparing prices and brands of the same product will certainly do no harm. Plus, your bank account will thank you for it. Always leave enough money to live comfortably not as though you’re making ends meet!
3. Set Goals
You’ll be more determined to be mindful with your funds when you recognize the reasons why you need to save. Identify your most important financial goals, then write them down and motivate yourself to achieve them as soon as possible. Try and set a saving goal each month and stick to it. The first way to achieve this is to have a policy of “no excuses”.
You have to be disciplined to change your unsustainable spending habits and become more responsible with your money. If you make saving your priority, you’ll eventually change your mindset. Remember though, you shouldn’t be too hard on yourself. Set realistic and achievable goals. You don’t want to be too careful to the point that you end up not buying the stuff you want either!
4. Save Change
Every little counts! You might think putting a few coins aside here and there is a miniscule endeavour, but you’d be surprised how much it’ll add up over time! So, save your small change in a piggy bank or jar. We tend to not consider small change, but we should! And, you’ll never know, maintaining this practice over a number of months can be a possible kickstart to that savings account you’ve been thinking of opening! The good thing about is? Over time, saved funds will be earning you some interest. And who doesn’t want extra money?
5. Create a ‘Rainy Day’ Account
By setting up a separate rainy-day account, it’ll make it more manageable to track how much money you’re actually saving. Alternatively, you can automate your bank account settings to ensure that a certain amount is withdrawn from your current and transferred to your savings account. Setting up up the system is the easy part. You need to be sure you’re actually maintaining it and being consistant!
Be disciplined with yourself and act like this monthly ‘stipend’ is non-existent, because it’s earmarked for savings. You could also make it more official and set up a saving’s plan with your bank or a trusted financial advisory company. This way funds are ‘locked’ and you won’t be able to use them until they’re reached a certain age of maturity. So it won’t really matter if you’re tempted to spend it, because you won’t be able to!
6. Mindful Mealtimes and Burdget-Friendly Entertainment
Try eating at home instead of at restaurants because eating out a few times a week can really add up. Invite friends over and cook instead. Or better yet, plan for everyone to bring one component of the meal – whether homemade or store bought – after all, you’re hosting!
Take your own lunch to work. Instead of going to the cafeteria or getting takeout, take last night’s dinner for lunch. Whoever said leftovers aren’t great is bonkers! As for winding down after a day’s work for inexpensive at-home entertainment, services like Netflix give you unlimited access to movies and tv shows for far less than cable networks. Think about it… with all that money you save on popcorn you could rather invest in home cinema equipment.
7. Choose Debit Cards Over Credit Cards
While it’s great to have a sum of money to fall back on when your monthly salary is drained, there’s always a catch, and it comes in the form of an interest rate. That’s why debit are better than credit cards, because whatever you’re spending is yours and yours alone. You don’t owe the bank anything (and then some!) once it’s spent. With a credit card, if you’re only paying off the minimum monthly repayment, there’s always that ‘pending amount’ lurking at the back of your mind. And, let’s face it, one way or another it’ll need to be paid off one day!
Congratulations… You’re on the right track!
Keep your eye on the prize and set yourself a goal that as soon as you’ve saved X amount, you’ll treat yourself to something small that you’ve always wanted. It could be a fun piece of jewellery, a new pair of shoes or anything you’ve been holding back on – as long as it’s only a small portion of what you’ve saved. Such tangible rewards will incentivize you to keep up your saving habits. Plus, knowing you’re building towards your nest egg is never a bad idea.