The Importance of Rainy Day Fund: Financial Safety Net

We live in a fast-paced and unpredictable world. There is no such thing as unexpected and unforeseen expenses. Do expect them and foresee them and prepare for them by building emergency fund.

Horrifying stats state that majority of people don’t actually have any money to speak of saved on a side. And when proverbial hits the fan debt is the first stop in the decent to disparity.

First order of things in creating financial stability is saving up and keeping at least 3 months worth of expenses. Better yet 6 but it is also important not to keep too much cash depreciating on low interest bearing accounts.

Work out what your financial commitments are say per month and save up 3 times the amount. People with salaries can limit cash to 3 month especially if there are two adults with income. If you are on your own and self-employed 6 months is more advisable.

At the start of building your emergency fund also arrange a line of credit. Cruel irony is that when the need for emergency funds arises people are often not credit worthy. For example if you are unemployed you can’t borrow extra funds against your mortgage or take a personal loan out. Plus we want to stay out of debt at all cost.

Savings can’t be created without a surplus and sometimes it’s good to simply start somewhere.

One strategy could be to sell up unused items.

June this year as an experiment on humans of my family I sold up stuff that had been laying around my house and collected just over $1,000 in a matter of few days. I can’t even tell what these things were, so I’m obviously not missing them. And that could be a start!

Leave a comment below with your ideas around how to save up for an emergency fund!

It’s also important to be realistic in how much money to set aside. Too tight of a budget would be causing stress in a situation that is probably already stressful, if you have to turn to emergency fund. But also to make sure your Rainy Day Fund is not being eaten up in inflation in a bank account.

Creating Rainy Day Fund is a very important part of you overall financial planning.

You don’t have to figure any of it out on your own. I’m here to help. Make an appointment for a consultation 02041560804 - call/text/message