Ways to Give your Rainy Day Fund a Major Facelift

It’s a rainy week in Michigan, so I think it makes sense to talk about rainy day funds. This fund is your knight and shining umbrella in the storm. Without it, you’re doomed.

Having a rainy day fund (RDF) is one of the best things you could do for yourself financially. It’s not quite the same as an emergency fund (EF). A RDF is set aside for unexpected expenses, such as car repairs, replacing a major appliance that broke down, booking an urgent flight to see an ill loved one, or getting your iPhone screen fixed because you forgot to get Apple Care. Guilty. 

These are things that could break your bank if you aren’t prepared for them. The difference between an RDF and an EF is that your EF is used for major circumstances that effect your actual income, like being laid off or losing your job; while your rainy day fund is used to pay for costly unexpected circumstances. Your EF and your RDF should be two completely different pools of money. Oh yeah, and your EF should be a lot bigger… like 3-6 months’ worth of your total expenses. But if you need a place to start, begin building your rainy day fund first.

 Now, on to the good stuff…

So, how much should be in my rainy day fund?

Your RDF’s meatiness is completely up to you. But if I had to give a range, I’d say anywhere from $1,000- $3,000 would be a great stash to have.

*Tip: Saving $20 a week will save you $960 by the end of a year.

Should I save it in my checking account?

No, heck no. No one is disciplined enough to see $5,000 in their account and only spend $50 a week. If you are, then why are you even reading this?! You want your RDF to be accessible, but not too easily accessible.

*Tip: Open up an account at a different financial institution than your primary checking account. It even helps if it’s not nearby your home or job, so that you aren’t inclined to stop in and grab some cash. That way, you can get to the money if you need to, but it’s not right in your face to mess with.

What if I don’t have enough money to save? I’m already living paycheck to paycheck.

Everyone has spare change laying around, waiting to be appreciated. Empty out your change every day into an old shoebox and let it pile up. Sell old clothes, or electronics you don’t use. Start somewhere and build from there. Saving is a gradual process.

 *Tip: There’s an app called Digit that will randomly take out small increments of money from your checking account and puts it into a savings account. One day it may pull out $1.38 and then a week later $6. It sporadically pulls out small amounts of money based on your spending patterns and income. It can be a really helpful tool for people who feel that they can’t afford to save, or just don’t have the discipline to do so. But by the end of the year, you’ve saved hundred dollars without even realizing it!

Moral of the Story

Having that extra cushion will save your butt when the fire is under you. Remember, this is not a stash to use to buy your next luxury handbag or tech gadget. This is for you. YOU. To help your own self when something comes crazy up, so that you don’t have to call mama and daddy, or go scrambling like an egg. When you fail to prepare, you’re preparing to fail. Take care of yourself, first.  

Be Easy,

Erin