It eventually rains on everyone’s parade, financially and figuratively speaking. The rainy days always come, but with careful planning and preparation the result doesn’t have to be post-diluvian debt. Financial emergencies can present themselves in many ways, whether medical, automotive or with employment. Having a little extra tucked away for those moments can be a great relief, and it doesn’t have to be a lot, or hurt in the process of saving it up. Putting away a little at a time and taking time to consider all expenditures will help develop a rainy day fund sufficient for your needs.
The first step of any savings plan is to identify and compare income and expenditures. Without knowing how much money you have it and how it is spent it will be difficult to save. Keeping a purchase diary for a few weeks or a month will help identify how, where, and when you spend your money. Once you know where your money goes you can determine where you can pull from in order to save. Just like it is the little purchases that add up at the end of the month to a hefty “miscellaneous” expenditure total, it is the little savings that add up over time to make a satisfactory rainy day fund.
Rather than going out to eat, try to budget money for meals and purchase food from the grocery store. Instead of paying seven dollars for one lunch at a fast food restaurant, prepare your own meal for a few dollars less and sock the extra money away in your savings. Cut out the extra snacks, especially any that comes wrapped for individual sale. One dollar for a candy bar in a vending machine is approximately fifty cents more than a candy bar bought in a bulk package at the grocery store. Saving money on food isn’t about going without; it is simply about managing your purchases to get the most for your money. The little bit extra you save can go into your rainy day fund.
Entertainment is an area where you might find some extra money to push towards the savings account. First of all, if your entertainment locations feature a snack bar, eat before you leave home. Secondly, approach your out of the home entertainment in the same way you approach your finances, that is, with a budget. Going to movies or live performance arts shows are great, but sometimes they can get expensive. Cutting back on going out can save some money that can then be diverted into savings. Entertainment includes cable access as well. With the increased availability of movies and television programs on the Internet, perhaps cutting cable entirely is a good idea, this can free up a large chunk of money for savings. DVD rentals are relatively inexpensive, but an online instant streaming subscription might be even cheaper. Every activity or purchase you can do for less, or replace with a free alternative, leads to more money for the rainy day account.
Overall the best practice is to make regular deposits into your rainy day fund, be it an account at a bank or credit union, a change jar, or a secret hiding place only you know about. It takes discipline to sacrifice a little bit now for the goal of having sufficient funds when you really need them, but it is worth the effort. A well defined budget plan will help maintain discipline so that you don’t spend your emergency fund on a new toy down the road. Predetermine, to the best of your ability, what will constitute an emergency where you will use these funds, and then stick to your plan. A good rainy day fund isn’t developed overnight. Use prudence to free up some extra cash from your regular income and then exercise discipline in setting it aside and leaving it aside until you absolutely need it. Everyone has a rainy day once in a while; make sure you get your umbrella ready for when yours comes around.