Journalist Jane Bryant Quinn wryly observed that “The shortest period lies between the minute you put some money away for a rainy day and the unexpected arrival of rain.”
Most of us realize the day will come when we find ourselves in need of readily accessible cash.
Whether it’s an unanticipated automobile repair bill, medical emergency, a death in the family, or natural disaster, life will inevitably pitch some nasty curveballs. Add to this an uncertain and rapidly changing economy and even the most prudent among us can find themselves blindsided when catastrophe strikes.
That’s why every financial educator and writer from Dave Ramsey to Suzy Orman to Robert Kiyosaki stresses the importance of having an emergency fund. Most business professionals encourage their clients to have at least six months’ worth of emergency money set aside.
This is a daunting proposition for many people since they often feel stretched to the breaking point when it comes to money. Several recent polls have indicated that over 70% of all Americans claim they live paycheck to paycheck.
So, how does a person of limited means or who is bogged down by debt begin the process of funding a “rainy day” account?
There are a few simple and relatively quick ways I have discovered to help get your rainy day fund off the ground. When combined with a debt reduction and cash management plan, small tweaks can add up quickly, and every penny does count.
Start small but stay on track
Don’t get overwhelmed. Starting small and being consistent is vital to ensure you don’t fall off the saving wagon. For example, if you put aside just $5 a day, you will net $1,825 per year. In ten years, your fund will have $18,250, maybe more if you manage to get some interest.
Find a second job
This may sound like an unpalatable idea, especially if your current job already wears you out or you have young kids. But, if you were able to tolerate doing this for a short time, you could build a fantastic emergency fund in under a year.
Sell the stuff you don’t want or need.
Are you still holding on to Suzy’s bunk beds even though she’s been out on her on own for years? What about that classic car you’ve never gotten around to rebuilding or your collection of porcelain pigs? You can make some cash plus empty the clutter in your house or storage shed by getting rid of that herd of white elephants. This can be accomplished the old-fashioned way by having a garage sale, going to a consignment shop, or listing items in the local paper or on eBay or Craigslist.
There are also phone and computer apps that allow you to sell items with the touch of a button. Search on Google to learn which ones are the most effective and easiest to use and which do a great job of safeguarding your privacy.
The “One and Done” Gig
Life often presents us with opportunities to make a bit of side cash by doing work for others. This could be something such as taking care of gardens and lawns while someone is on vacation, babysitting, dog walking, or helping with a home improvement project. These “gigs” won’t force you to commit for long periods of time, and they will put some extra jingle in your pockets.
If you have specialized skills (ex: graphic design, SEO, writing, photography, web design, etc.) you could advertise on sites such as Fiverr, Upwork, or Freelancer. These sites do charge you a portion of your fees, so price accordingly.
Put off buying a new car or get a less expensive one
Nearly everyone loves a beautiful, new luxury car. Paying for one though might use up more of your income than necessary. The vehicle itself might also cost you more for insurance, maintenance, and fuel. Choose a less luxurious car that will last longer and isn’t so expensive to maintain. Then, put the difference into your emergency account.
Treat your fund like another bill
Consistency is critical to success in just about everything. If you want to see, your rainy-day fund take off, pay into just as if it were another bill in the pile. If at all possible, set your fund up on autopay.
The best kind of coin collection
You’d be amazed at how much money you can find in loose change. Make a habit of tossing your extra change into a jar at the end of the evening. When the jar is full, roll up the coins and take them to your bank. You can also use the automated coin sorter at your local grocery store. Be aware, however, that those machines charge a fee for the service.
Audit every expense and ask for that discount
I have discovered that taking a hard look at where my money goes every month often yields big savings. For example, doing something as simple as taking advantage of seniors, military, disabled, or student discounts can mean significantly lowered monthly expenses. Many utility companies offer special savings to seniors, disabled persons, or those on Medicare or Medicaid. These savings can range anywhere from 10%-40%. Call your local utility company and ask which, if any, programs are available. You can find similar discounts for automobile insurance, Medicare “gap” insurance, prescriptions, and other goods and services. The takeaway here is never to assume that a price is as stated- ask for your discount.
There are many other ways in which ordinary people, even those on fixed incomes, can find money they didn’t realize they had and build amazing emergency funds. A fund that will give them more options and greater peace of mind. If you’d like assistance with starting your rainy day fund, contact me, and I will be glad to walk you through the process.