Did you know there is a difference between an emergency fund and a Rainy Day fund? It is subtle, but it is there. As long as you are interested in furthering your financial future, this information is valuable. It won’t take long for you to learn the difference. However, it could pay off big time in the long run.
1. What Is the Difference Between a Rainy Day and an Emergency Fund?
So, what is the difference between these two financial concepts? It is rather straightforward. Most of the difference lies in the intention behind the fund.
Rainy Day Fund:
Rainy day funds are not meant to be used for catastrophic emergencies. This money can be for when you get unexpected free time. That way, you can go out and do something enjoyable.
What would happen if you had an unplanned $500 expense? For most Americans, the only option would be to use credit. On the other hand, you could create an emergency fund and use that money.
2. Why You Need to Save for a Rainy Day
What is it about life that creates the need for financial security? Unfortunately, most things require you to pay for them. When you get in a bind, the answer is usually a dollar bill.
Less Stress in Your Life:
How stressful would a flat tire be? Often, the answer is dependent on your financial situation. People who have enough money do not need to worry about getting a new tire. Thus, the entire event is not stressful.
Saving Teaches Discipline:
Discipline is one of the most important virtues you can develop. Saving money requires that you become more self-disciplined. This will bleed into other areas of your life to create cascading benefits.
Financial Security Even When The World Is Chaotic:
Life can be unpredictable, with situations like debilitating sickness and injuries, sudden job loss, etc but despite these occurrences life goes on and we have to try to adapt. If someone suddenly loses their job they still have to pay their rent, Infinite Energy utilities as well as their other bills. This current pandemic is a good example of unpredictability, many people lost their jobs without any savings and were left stressed and scared of their financial future. Rainy Day and Emergency Savings funds are beneficial to your financial health but they are also significant for your mental health by offering a peace of mind.
3. Emergency and Rainy Fun Tips
How do you create an emergency fund? The answer is simple. All you need to do is stop spending as much money. Then, set the money you save aside in a secure location. We recommend putting it somewhere that you do not have easy access. This helps discourage impulse spending.
Cease Impulse Purchases:
How often do you make purchases based on impulse? It probably occurs more than you would like to admit. Large parts of our society are created to make us purchase things impulsively. Resisting this temptation requires a ton of willpower. If you can stop, you would be amazed at how quickly you save money.
Commuting to and from work costs more than you realize. Every time that you fill up your car, that is more money out of your next paycheck. Carpooling is an easy way for you to cut down on the cost of commuting. By splitting the cost with several coworkers, everyone gets to save money.
Work From Home:
Today it’s possible for you to eliminate the need for a commute at all. You could choose to work from home. By working from home, you save both time and money. There is no need for you to put gas in your tank when you don’t have to drive to go to work.
Do not make a large purchase without price shopping. It’s possible for you to save substantially by simply going to another location. That is the beauty of capitalism. Competition creates the lowest prices the market will bear. However, you still have to find them.
Making it Through an Emergency Without Going Bankrupt
Do you have a plan for a financial catastrophe? If not, it would be better if you got started making one. Nobody can predict the future. However, you can plan for it. Plus, planning for the future creates plenty of benefits.