Chances are you familiar with both an Emergency and a Rainy-Day Fund. Although they are not the same, they both require discipline like any other savings effort. What they have in common is that they act as a cushion when life gets challenging and help you sleep soundly.
1. What Is a Emergency and Rainy Day Fund
An emergency fund is simply money you’ve set aside for life’s unexpected events such as losing your job in which case you should have at least three to six months of living expenses. A rainy-day fund has the purpose to pay for the occasional smaller expenses, such as a vet visit or if your laptop needs to be repaired.
An emergency fund is your safety net and one that you hopefully won’t even need. A rainy day is more likely to happen such as your kid needing braces or replacing something within your home. Although you might think this is not such a big cost so what’s the point of having it aside, the truth is that a rainy day fund will keep debt at bay.
The bottom line is that having a savings fund helps you be prepared for anything that life can throw at you. So, make sure you factor in savings within your budget.
2. Importance of Having a Savings Fund
Saving is not a hard habit to adopt. All you have to think about are its benefits.
Savings give you the power to react in emergencies
The definition of emergencies is that they are unexpected. When they occur, accumulated savings can go to great lengths to alleviate the situation.
Savings act as a cushion
Job loss or illness are traumatic experiences. They also make you into a less appealing loan candidate, further adding to the stress. Savings can comfort you a bit during this stressful time.
Savings keep you free of debt
Savings will be there when you need the extra money, so you don’t have to pull out your credit card.
Savings give you financial freedom
Savings will help you go on that vacation you always dreamed of. Every wealthy person that there can be no wealth without savings.
3. Guide To Your Emergency Fund
To begin with, you need to set your monthly savings goal to build your fund. As time goes by, you will be able to save even more by identifying new ways to reach your goal.
Practice energy efficiency around the house
Adopting energy-efficient habits such as turning off the lights when you leave a room can significantly decrease your monthly Oncor Energy bill. When using the oven, don’t pre-set the temperature for dishes that require long cooking times as it won’t make much of a difference and also turn off the oven a bit before as the achieved heat will finish the job. During winter, dress up for the occasion with a ton of layers before you reach for your thermostat. It’s these little actions that make a difference.
Get a side-hustle
Getting a profitable part-time job that will get you some extra cash is easier than ever. If you have a dog, you can earn money by bringing your neighbor’s dog for a morning walk as well. Besides pet care and dog walking, there are endless opportunities online. You can write articles, give math lessons, give advice or just find a way to get money in exchange for something you are good at.
Sell what you don’t use
Go through your garage and your basement and get rid of everything you no longer use. You can be surprised how quickly even $5 here and there can add up.
Takeaway – The reason you should have an emergency and rainy-day fund is simple: life is unpredictable. No one wants to live at the mercy of life’s twists and turns. Savings are the safety net which won’t let you get caught off guard.