Creating A Rainy Day Fund In 2014 With These Finance Tips
Learn Why Creating Rainy Day Funds is Important To Financial Freedom Goals In 2016
It is hard to predict when unexpected expenses will come knocking your door, and it is essential that you have a fund that would cater for the budget shortfalls when things go haywire and you have no cash. Planning for financial goals requires some nitty gritty things, which may seem less important but they count towards the overall financial stability. Many consumers are finding themselves opting for predator loans simply because they do not have emergency funds.
Creating rainy day funds can offer relieve when financial shortfalls occur in your budget. According to FINRA investor education foundation, less than half of Americans have created a rainy day fund, which can cover expenses for three months. Although there are different opinions on how much consumers should put away as part of the rainy day fund, regardless of the period, it is essential to create a financial cushion to enable you meet emergence expenses.
When you are faced with emergency expenses, it may lead to diversion of money from the regular expenses to the emergency, and the impact can be long standing. If instead of paying your credit card payment, you use that money to meet an emergency cost, then you risking carrying higher interest rates. In addition, if you opt for a payday loan to meet an unexpected expense, it will also cause harm to your finances.
However, creating a rainy day fund can offer you money, which you can use when you find yourself in shortage of money. The vice president of membership and public relations, at the National Foundation for Credit Counseling in Washington, D.C, Gail Cunningham says that the less money a person has, the more important it is to create a financial safety net, as the slightest unplanned financial expenditure can put you over the edge in your finances.
When you do not have a rainy day fund, chances are that you will divert money meant for high priority such as rent or credit card balance payment to the unexpected expense. At least, a person should put away a one-month’s income in order to meet the cost of short term emergencies but it is recommended that consumers should have up to 6 months income put away for untimely emergency expenses.
You can divert money from the little household expenses and put it in the emergency fund account. If for example, you have five categories of spending such as on utilities, clothing, grocery, and fuel, you can save as little as $10 from each category. This makes it painless to save $50 in a month, and by the end of the year, you will have $600 worth of money you can use for unexpected emergencies.
Other suggestions which you can rely on to boost your rainy day fund is by saving your tax fund, or banking unexpected funds like bonuses or pay increments. If you have a large amount of debt you are handling, you probably need a larger safety net, but if you have paid your mortgage and you are debt free, then you need less safety net.
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