Everyone knows the saying, “When it rains, it pours.”  However, most of the time, this isn’t responding to how much rain is falling outside your window.  It’s usually in response to a season of being on a debt hamster wheel of one bill after another. But you don’t have to fear this cycle.  Take steps now to prepare your “rainy day fund” before the skies cloud up.

This “rainy day money” should be more appropriately labeled an emergency fund.  Your emergency fund is set aside for unexpected expenses that appear now and then. These can include things like job loss, co-pays, medical bills that remain once insurance has paid, emergency home repairs, or emergency travel. 

To make sure you are well prepared in an emergency to cover the costs, most financial experts recommend having at the very least three months’ worth of your present living costs tucked away.  In order to calculate this, add up the essential items in your budget every month. Things that you usually spend like food, shelter, clothing, phone, internet, and transportation. Any non-essentials, like non-medical procedures and eating out, should be excluded. Using that calculation, multiply by three, and that is your goal emergency fund.  That means if it takes $4,000 per month to maintain the essentials in your household, then your target emergency fund should be about $12,000.

Don’t let the size of the emergency fund scare or put you off.

You’ll be working for some time to reach this goal.  Here are some ways to help you build your emergency fund for those rainy days!

Begin your emergency fund by opening up a fee-free, high-interest savings account. 

Make sure you can’t make withdraws from it easily with a debit card, or you’ll defeat the purpose of setting these funds aside!  

Then, using your automatic payroll deductions, pay your emergency fund bi-weekly. 

If money is very tight, start with a modest amount and increase it every few months.   

Whenever you are facing a welcomed tax return, extra funds from gifts, or side work, make sure to put those into the account as well!

As your account begins to grow, resist the urge to take out any funds that don’t qualify for an actual emergency.  Also, look for ways to cut your current spending on non-essentials.  Consider reducing or nixing your restaurant spending in lieu of savings!

If along the way, you experience an emergency or two that has you withdrawing from your fund before you reach your goal, don’t despair.  Emergencies happen, and that’s what this fund is designed to do; to help you through the rough patches without going into debt.  To get back on track, commit to refiling your emergency fund as soon as possible.  

If it’s been pouring on your finances and you find yourself drowning, it may be time to look for a larger umbrella.  If you are considering filing for bankruptcy, let us guide you through the practical steps to get a fresh financial start. Call us at 239.775.2000 to schedule a free, private, and confidential consultation.