Building your ‘Rainy Day’ Fund

The desire to build a ‘Rainy day’ fund or as it is often referred to, ‘An Emergency Fund’ is very common with most people however in reality never gets started.

Most advice found out focuses on the general rule that this should be three months income.

In reality, the simple thought of trying to save that much money can be quite scary for most people.

For anyone living pay week to pay week, it feels like the impossible task and getting started never happens.

Below I cover three main reasons why people never get started and also three reasons you should get started.

Three reasons why we never start

  1. The ability to do the math sabotages our belief

Typically advise recommends three months income as the goal and we can very quickly calculate an amount required.

We rationalise that to save this amount will take forever and our brain has now been subconsciously triggered to focusing on three months.

“I can’t save that much that quick” is the result of confusing the timeline with the goal.

We have just placed an unrealistic expectation on the timeline therefore it is pointless even trying.

  1. We assume we can borrow the money if we ever need to

For a long time now, it has been relatively easy to access money through mortgage top ups, personal loans, interest free deals and the most recent release of Flexi-Pay options (pay little amounts over several weeks).

This easy access has removed the discipline of saving. In reality it is a very small portion of the population that genuinely cannot save anything.

For most, the ability to save is real we simply assume there is no reason to.

Check out your ‘Minimum Savings Capacity’ here

Register for the 10- week ‘Emergency Fund’ Savings Challenge and make it happen.

10 weeks where I help you build the discipline of saving with a simple to apply challenge each week.

There’s no cost to participate,  but can be quite costly to do nothing.

  1. We lack discipline

Offers and opportunities to spend are constantly present. Previous decisions to put savings first have been short lived.

We may have started with the intention but then as the savings balance grows some ‘Great Deal’ tempts us to spend it.

Instead of keeping the building up of a ‘Rainy Day’ fund the priority, we use the money and default back to point 2, assume if we need it, that we will be able to just borrow it.

Essentially now just living for today hoping tomorrow will take care of itself and someone else (your bank or finance company) will come to the rescue.

Three reasons to start today

  1. You are in control of your money

The discipline of saving means you are in control of your money rather than money controlling you.

Your engagement with other financial decisions increases rather than happening out of routine or habit. A savings capacity increases over time as you find additional ways to save money through adjusting expenses.

These additional ‘savings opportunities’ reinforce your belief that saving is possible.

  1. You have choices

When committed to repayments for personal loans, overdrafts, Flexi-Pay arrangements etc, finances can become squeezed and as a result choices are reduced for things that may be important to you.

Savings provides the ability to navigate the unexpected without the need to do so on someone else’s terms.

At times it may still be practical to use a loan however you are doing so out of a choice not a necessity. That choice means the decision to borrow at any time is because it works to your advantage.

Cash also means you can negotiate on price with most purchases.

  1. Life has less stress

Financial worries is one of the main contributors for stress. Having a ‘Rainy day’ or ‘Emergency Fund’ removes stress because you are equipped with time to plan.

Suddenly finding yourself off work, having to consider a larger than normal living expense such as a mechanical breakdown or dentist bill will always be stressful if you now have to figure out how to fund it or how you can afford it.

Having savings means you have time to step back, evaluate options, shop around for prices and make an informed decision.

The ability to step back and work through your options often saves you more money because you aren’t obliged to your only option being the one who will finance your need.

Having control of your money, choices and less stress is something everyone should be able to enjoy.

Establishing a ‘Rainy day’ fund is the perfect place to start.