Is your rainy day fund all dried up? Hoping you don’t have a financial emergency because you’re broke?
Do you have money set aside for an emergency? Money you call your rainy day fund, not to be touched unless in a dire emergency? Or are you hoping you don’t have an emergency just yet as you don’t have the money to cope with one?
Emergencies happen when you least expect them. Just look at the accident and emergency department in your local hospital, the people there weren’t planning on having their accident/illness.
It’s the same with your money. You can plan all you want but life will throw you a curve ball and you need to be prepared when it does. Because it will at some point.
What is a rainy day fund?
A rainy day fund is your pot of money for when life throws you that curve ball and you need money fast. Money that you hadn’t planned on spending and is on top of your usual bills.
If you spend everything you earn each month not having any emergency money will hit you hard. But you can plan for emergencies by having a rainy day fund even when you feel broke.
What’s your emergency?
Emergencies that cost money always cost more than a few quid so you can’t always pay for them out of your regular pay check. Not being able to cover an unexpected bill can be the cause of sleepless nights for people and increases your stress levels.
Emergencies could include:
- a large vet bill
- urgent car repairs
- the tax man sends you a bill
- new car
- unexpected funeral at the other end of the country
- losing your job
What it isn’t
There will be times when you want to spend money but haven’t got any left. There may be times when people are really encouraging you to spend money because you apparently deserve it.
Just remember you deserve to sleep well at night and that is what your rainy day fund will do for you.
- Going out for a meal because your best friend invited you
- Paying for a holiday on the premise you’ll add the money back
- Covering the last week of the month because you ran out of money
These aren’t emergencies, they are either bad choices or bad budgeting. Your money will only stretch so far and today it needs to be focused on building your emergency money.
You can pay for a holiday once you’ve got your rainy day fund in place.
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How to kickstart your rainy day fund when you are broke
A positive mindset
If you’ve never saved any real money before or have lurched from paycheck to paycheck it would be very easy to think that saving $/£1000 is an impossible feat. If you think like that it will be impossible.
Be positive! Know that it can be done, that you can do it and you will make it happen. Having a positive mindset helps you get over the difficulties life throws at you and achieve your goals.
Having a rainy day fund is a financial goal you can achieve.
Decide what is a starting point for your fund. Many people suggest £/$1000. Longer term you may want to build your pot further to cover 3-6 months worth of living expenses.
Having a larger rainy day fund will help you with longer term costs such as losing your job, an unexpected pregnancy or ill health.
But if you have no emergency money put aside then start with £/$1000 as this is easily achievable in the short term.
- Save £/$32.25 a day for a month
- Save £/$16.12 a day for 2 months
- Save £/$11 a day for 3 months
And you will have saved £/$1000.
Set your budget
You need a budget for your living expenses. Work out what all your bills and outgoings are then decide on how much you are going to set aside to build your rainy day fund.
Find ways to save some money, cut out treats, a meal out or new clothes until you have your fund built. This is an emergency – you need a rainy day fund so find room in your budget to free up the cash.
Related reading: 25 tried and tested money saving tips
Do a house check
How many times have you found loose change in various places when you didn’t know it was there? Kitchen drawers are a classic place for me to find cash. Other people swear by the back of their sofa.
Every penny helps so check your house for loose cash and keep that money safe.
Pay yourself first
Don’t wait until the end of the month to see what money you have left over to put into your rainy day fund. Pay into your fund as soon as you receive your wages.
This is emergency money and therefore vitally important to your financial well-being. You (and your future emergency) comes first. Pay yourself first.
Related reading: The Easy Way To save Money – 15 tips to save $14,000 a year!
Make it automatic
Set up your payment so it leaves your account as soon as you are paid, automatically. Don’t rely on yourself transferring the money, at some point. Automate and forget.
Make it accessible
You will want your emergency money to be very accessible, as in a few hours. Selling your car to free up cash does not constitute an emergency fund. Nor should you be putting your rainy day fund into the stock market.
A jar in your kitchen might be too much temptation so a separate savings account may be best, make sure it’s an instant access account. Do what works for you.
Related reading: How to choose the best savings account for your cash
Don’t make it too accessible!
Now I know I said make it accessible but don’t get an account where you have a debit card for it. If necessary, cut the debit card up.
You don’t want to mistakenly use the debit card on this account nor do you want the temptation when you are out shopping.
If you haven’t recently had a good clear out of your cupboards, now is the time to do so. Selling your stuff to build your emergency money is a great way to build it painlessly.
We are all guilty these days of having too much stuff and not using most of it. Making some cash from your stuff is a great way to declutter as well.
A great way to get your rainy day fund built in record time is to earn more money.
You might be able to pick up extra shifts at work but if you’re like me and have a regular job with regular hours then you’ll need to look elsewhere for the cash.
There are plenty of ways to earn extra money, you could:
- Switch bank accounts and earn a cash bonus
- Deliver pizzas
- Become a mystery shopper
- Become a dog sitter
- Get a 2nd job
- Wait tables at the weekend or in the evening
Give yourself time
If you’ve never had a rainy day fund before, don’t demand of yourself that you build one in a month. Don’t set yourself up to fail. Baby steps are good and are better than no steps.
Every penny you save is a penny you didn’t have saved before. If it takes you 3 months to build £/$1000 so be it. In 3 months time you’ll have your rainy day fund – wahoo!