The economic crisis of 2007-08 made a lot of people realize the importance of having a rainy day fund. But even after a good five years after the recession, not many people have worked on improving the state of their finances. Most people are living paycheck to paycheck, and have nothing to fall back on in case things go awry. However, it is never too late to start saving for a secure tomorrow. The below mentioned points will guide you on how to go about saving for a rainy day fund.
Analyzing the state of your finances will give you some clarity on how you manage your money every month, and help you in forming a strategy for your financial planning. You will get some perspective on what percentage of your net monthly income goes towards your liabilities. It will also give you an understanding of your disposable income. Depending upon the amount of ‘free money’ that you have after paying off the creditors, you should plan a strategy to allocate money to the rainy day fund. Most financial experts opine that you should ideally save 10% of your net monthly income every month. Therefore, somebody earning $50,000 per year should be looking at saving around $400 every month. This 10% is exclusive of the amount that you might be funneling into stock market or buying gold bullion. It is important to remember that there is a considerable difference between saving and investing your money. We are not dissuading you from investing; in fact, it is the only way you can grow your capital. However, you should consider investing only when you have the required emergency funds to see you through an economic crisis.
Stick to a Budget
When people are asked what stops them from saving for emergencies, one of the common answers is, “I have so many debts to take care of that I hardly have any money at the end of the month.” However, if financial experts are to be believed, most people can easily save some money, provided they stick to a budget. Most of us end up making impulsive decisions which completely hamper our plans of saving for a rainy day. When we step out in a shopping mall armed with a credit card, the likelihood of unnecessary expenditure increases, which completely offsets the important task of keeping money aside for a savings fund. Again, we want to point out that we are not telling you to live a frugal life. Buying that new car or smartphone, eating out at plush restaurants, taking a vacation – all these are important for every one of us, but these should be done in moderation. Also, indulging in these luxuries should only be done if you have at least six months of your living expenses in savings. Trust me, once you have the security of a rainy day fund in the back of your mind, you will be able to enjoy your life in a better way. Gold Price and Gold Bullion
See if you can Moonlight
If you want to quickly accumulate funds for a rainy day, try taking up an additional job. If you have sufficient time in your hands, a second job might work very well for your financial future. There are a lot of jobs that you can do from the comfort of your home. The internet has opened up a huge market for crowd sourcing industry – an industry where people are employed over the internet for ad hoc assignments. Writing jobs, website designing, data-entry, etc. are some of the common jobs that are helping people compliment their primary source of income. All you need is a personal computer with an internet connection, and you can join the community of online workers. Working hard today can mean that you are able to relax in the future, or probably retire at an early age. So if it works for you, give a part-time job a try.
These were some tips on saving for a rainy day. The economic scenario in many major economies around the world is far from what we can call optimistic. To ensure that we are not entangled in the mire of unending debts or bankruptcy, it is important that we take concrete steps and start saving for our future.
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It does not represent the opinion of Benzinga and has not been edited.
Posted-In: Personal Finance