By: Admin / TextrOnline
So you have painstakingly made an immaculate budget that makes you feel confident. Then something crops up in the middle of the month that doesn’t fit into your projections. This is where your fund for rainy days comes in for the rescue and saves you from drowning in the sea of debt.
A rainy day fund might sound something out of a fictional movie, but it’s actually a real thing that can save you in tough situations. Unlike your retirement savings that you plan to bust after you quit your job, a rainy day fund is the money you subtract from your salary for unexpected situations to help you stay afloat.
Those who live from pay-check to pay-check find it difficult to accumulate funds for an emergency. That is why we are sharing our 4 tips for creating a rainy day fund that will protect your financial future.
A great way to start is by setting the intention of saving up before you start cutting down your pay-checks. Even if you can’t add money to your rainy day account, you at least have a safe place that keeps reminding you what to do with spare cash. Gradually, you will develop the habit of contributing to your rainy-day funds but waiting for spare cash will leave you ill-prepared for emergencies.
Take a good look at your monthly budget and see where you can draw from. You will have to eliminate something from your existing budget. Make sure it’s an irrelevant addition you made to satisfy your desires instead of achieving your needs.
Don’t wait for extra money to come from the sky so that you can add them to your rainy-day funds. Start with what you have, no matter how small it is. Unlike other savings, you need to develop a habit for your rainy day funds. So make sure to add even as little as possible but never to stop. Because once you pull the brakes on your bandwagon to rainy day savings express, igniting the engine again won’t be as easy as twisting the key.
Once you have a habit of saving money, make sure you take stock of your situation periodically. When you earn a raise on your salary or find a better-paying opportunity, make sure to treat your rainy-day funds every month. The best practice is to follow the percentage method. Take out 20% of your salary for rainy day funds every month and take a 10% chunk of your raise(if you score). This will help you stick to a schedule, and you will know what goes into your rainy-day funds.