The Rainy Day Fund: Planning for the Unexpected

Nothing has the potential to mess up your finances more than an unexpected expense, which is why it’s important to have a rainy day fund in place. A rainy day fund is for unanticipated but necessary expenses like medical deductibles or car repairs, it is not personal wants or desires that you didn’t save for, like a new car or vacation.

So how do you go about planning for unplanned expenses? We have a few suggestions that may help make it easier for you:

• Open a separate account – When making your budget, include a set amount of money that will go towards your rainy day fund each month. Open a separate savings account at your credit union and deposit that budgeted amount into the account each month. Do not touch this money unless the “rainy day” need arises, and when the time comes that you do have an unexpected expense, you’ll be able to pull the needed funds without having to dip into your primary credit union accounts.

• Cushion your checking account – If opening a separate account doesn’t appeal to you, try saving up money each month so that you have extra cash sitting in your checking account instead. When any unplanned expenses come up, you’ll have the extra money available and easily accessible. The hardest thing about this method of saving is the urge to spend the extra cash just because it’s there.

• Plan ahead – A lot of expenses, like car repairs and medical emergencies, are things you can’t anticipate. Other expenses such as birthdays, holidays, and vehicle registrations are annual costs that you know are coming and can plan for. Try to figure how much your bills will be for each anticipated event, and adjust your monthly budget to save a small amount into the account dedicated to that expense.

• Be smart with extra income – Are you receiving a raise or big bonus at work? Expecting a nice tax refund? While you may feel the urge to treat yourself with the extra money, you’ll want to be wise about it and practice some restraint. As a compromise, you can use a small percentage of your additional income on “fun” things for yourself, like new clothes or dining out. Stick the additional income into your rainy day fund for those unexpected expenses.

It’s extremely important to be setting aside money for unplanned expenses. If the suggestions above work out for you – that’s great! If you would like to set up an extra savings account for your rainy day fund, visit one of our branch locations and talk to a Financial Specialist.