From tyre blowouts to engine problems, cars come with their fair share of unlucky surprises. It’s important to have a bit of extra cash saved up in case there’s a crisis. That can help you fix the problem without going into serious debt.
Here are 5 tips for starting a rainy-day fund:
1. Understand what the fund is for
If you struggle to be disciplined with your savings, it’ll be easy to find a reason to dip into it early. Clearly define what your rainy-day fund is for, so that you won’t be tempted to use it for other needs. It’ll take a fair amount of self control to remember that this fund is strictly for emergencies only.
2. Draw up a budget
Draw up a budget in order to work out exactly what you’re spending each month. Your budget should include car repayments, home loan or rent, bills, groceries, clothing, entertainment and anything else you spend money on. This should give you a better idea of how much you can afford to save.
Have a close look at your budget and see if there are any areas where you could be spending less, and channel the extra cash into your rainy-day fund.
3. Be realistic
Choose a reasonable amount of money that you can regularly put towards your rainy-day fund. If you try to put away more than you can realistically afford to save, you’ll end up needing to dip into your rainy-day fund to make ends meet. The goal is to save a portion of money every month, while still being able to cope with your everyday expenses.
4. Save any extra income
Look for any opportunity to put money towards your savings. If you’ve finished paying off a loan for your car, you could keep paying that same amount into your rainy-day fund.
5. Don’t stop
Once you’ve got a rainy-day fund set up, keep up the good work! Remember to save money each month in order for your rainy-day fund to grow. Plus, you will be developing excellent saving habits in the process!