Guest post by Rebecca Lee
Everyone knows the feeling of being caught unprepared for an unexpected expense. Whether a blown tire or a sudden illness, those unexpected costs can quickly add up and leave you struggling to make ends meet.
That’s where a rainy day fund comes in. By setting aside a small amount of money each month, you can build up a cushion that can help you weather any financial storms that come your way.
Unlike credit cards or loans, a rainy day fund doesn’t come with interest charges or late fees. So if you’re looking for a way to reduce stress and stay financially afloat, start building your own rainy day fund today.
In this post, we’ll share our top tips for building a rainy day fund to help weather any financial storms.
How to determine how much money you need in your rainy day fund
Everyone knows they should have a rainy day fund – but determining how much to save can feel like a guessing game. Do you just put away enough to cover your monthly expenses? Or do you aim for six months’ worth of living expenses? The answer, as with most things in life, is somewhere in the middle.
A good rule of thumb is to have three to six months’ worth of essential living expenses in your rainy day fund. This will help ensure that you can weather any storm – whether it’s a job loss, medical emergency, or unexpected home repairs. Of course, the amount you ultimately decide to save is up to you. Just be sure to start small and gradually increase your savings over time. After all, even the strongest umbrella can’t protect you from a financial downpour if your savings account is empty.
Setting up a system for automatically transferring money into your rainy day fund
There’s nothing worse than watching your hard-earned money disappear into the abyss that is your savings account. But whether you’re saving for a rainy day or your future retirement, setting up a system for automatically transferring money into your savings account can help you reach your financial goals. Here’s how to get started:
- Figure out how much you can afford to save each month: This will be different for everyone, so there’s no magic number: Just make sure you’re comfortable with the amount you’re transferring into savings.
- Decide where you want your money to go: Do you want it to go into a separate savings account? Or do you want to invest it in a longer-term goal, like retirement?
- Set up the automatic transfer: This is usually easy to do online or through your bank’s mobile app.
And that’s it! Once you’ve set up the transfer, your money will automatically move into your savings account (or wherever else you’ve decided to put it) each month. No more worrying about whether you’ve saved enough – it’ll all be taken care of automatically.
Try setting up an investment fund
Investing your money is a great way to grow your wealth over time. But if you’re worried about losing money in the stock market, investing in a low-risk investment fund can help you sleep better at night. Investment funds are managed by professionals who invest in various assets, like stocks, bonds, and real estate. This diversification helps to minimize risk and maximize returns. Additionally, because investment funds are designed for long-term growth, they’re a great way to grow your rainy day fund into something truly substantial.
However, this does require you to research the different types of investment funds available and choose one that aligns with your financial goals. If you need help figuring out where to start, we recommend looking into the mining industry, as it has shown to be consistently profitable over time. In particular, resources such as iron ore are a good option as they offer a safe outlook, according to The Assay.
Essentially, this will ensure you have the money you need when an unexpected expense pops up – without putting your long-term financial goals at risk.
Tips for resisting the temptation to spend your rainy day fund
It’s easy to spend a day curled up on the couch browsing online stores for new clothes or gadgets. But if you’re trying to save money, resist the temptation! Here are a few tips to help you stay strong:
- Distract yourself: Get out of the house and do something that has nothing to do with spending money. Go for a walk, visit a friend, or start a new project.
- Get organized: Make a list of things you need to buy, and set a budget for each item. This will help you resist impulse purchases. There are a range of useful apps to help you do this, you can check them out here.
- Put your money away: Put your credit cards and cash in a safe place where you won’t be tempted to use them. Alternatively, withdraw only the amount of cash you need for your planned purchases.
- Wait it out: If you’re struggling to resist spending, give yourself some time to think about it. Go for a walk or take a nap, and see if the urge passes.
By following these tips, you can make it through any rainy day without blowing your budget and avoid the feeling of financial stress.
What to do if an unexpected expense pops up
Unexpected expenses are never fun, but they’re a fact of life. Whether it’s a broken-down car or a surprise veterinary bill, sometimes you just have to bite the bullet and pay up. But how can you handle these unexpected expenses without breaking the bank?
Here are a few tips:
- Stay calm: It’s easy to panic when an unexpected expense pops up, but it’s important to stay calm and think logically about the situation. If you can keep a level head, you’ll be more likely to make good decisions about handling the expense.
- Make a plan: Once you’ve calmed down, it’s time to sit down and make a plan. First, assess how much money you have available to cover the expense. Then, figure out how much you can reasonably cut back on other expenses to free up some extra cash. Finally, come up with a timeline for repaying the debt. Creating a plan will make you less likely to feel overwhelmed by unexpected expenses.
- Talk to your friends and family: If you’re struggling to find the money to cover an unexpected expense, don’t be afraid to reach out to your friends and family for help. They may be able to lend you some money or help you out in other ways. Just be sure to repay any debts ASAP so you can avoid a difficult financial situation yourself.
- Use credit wisely: If you need credit to cover an unexpected expense, be sure to do so wisely. Only charge what you can afford to pay back within a reasonable timeframe, and be sure not to max out your credit cards or take on more debt than you can handle. Using credit responsibly can avoid putting yourself in a difficult financial situation down the road.
No matter how well you plan, there’s always a chance that you’ll face an unexpected expense at some point. But by following the tips above, you can help ensure that these expenses don’t dent your long-term financial goals. Stay calm, plan, and be smart about how you use credit, and you’ll be able to weather any financial storm coming your way.
