If there is anything that the recent COVID-19 pandemic has taught us is that unexpected and uncertain circumstances can occur at any time. And that it is always best to remain prepared. From people losing their loved ones and businesses collapsing to incomes falling, the world witnessed how destructive and calamitous the pandemic had been.
Not only that, the aftereffects of COVID-19 are worse. The global economy is going into a deep recession. Thousands of businesses are shutting down, millions of people are losing their jobs, and salaries are being reduced by almost 70%.
Truthfully, these are not the best of times. The financial security of individuals is at high risk. It is imperative to be cautious in such an unpredictable, deteriorating time. Perhaps, the best and most gainful thing you could do is start preparing for a worsening future with efficient money management. Saving for rainy days can help you overcome future challenges and remain financially secure. Here are a few tips on saving money for rainy days.
Open a Separate Rainy Day Bank Account
It is easy to get excited over your spending and not save any amount. For this reason, a separate bank account for rainy days might be a good solution. You must decide on a specific amount and transfer it to your rainy-day bank account monthly. The amount could be a literal number or a percentage of your monthly income. Remember, the aim of this account should be saving specifically for rainy days and no other expenses.
Suppose any scenario arises where you temporarily fall short of money. In that case, you must first consider your options before taking cash from your rainy-day account. You can also source an emergency loan through a service provider in your region.
However, it’d be a good idea to open a bank account even if you can’t fund your savings now. What’s essential is your intention to save. Once you set your intention, you’ll naturally start saving up slowly.
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Build the Habit of Saving
As already mentioned, saving can be problematic initially, especially if you are a habitual buyer. However, commitment is crucial here. Start saving with whatever you can, no matter how small. Once you get in the habit of saving, force yourself to be consistent.
Remember, saving is much less of a job once you become habitual. Consistency matters significantly, especially when you are a beginner. All you must do is set aside an amount to save every month. You’ll find remaining consistent is much easier with automated savings.
Automated savings help manage savings according to your needs, put money aside without thinking about it, and quickly create a rainy-day emergency fund. To automate your savings, start earmarking income for investment, save your tax refund, split your direct deposit, and use a cash-back credit card.
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Pay Your Bills on Time
Timely bill payment is the most effective money management tip you will ever receive. Your credit score improves when you pay your bills within their due dates, and eventually, you become eligible for larger loans. Also, you get a lower interest rate on your credit account. Furthermore, you don’t have to pay a late fee charge or penalty and save money. This habit lets you squander money on other needs and frees you from stress and anxiety.
Likewise, consider switching to a debit card to pay your monthly bills. The issue with credit cards is that they might charge you high-interest rates if you pay the minimum amount every month. These interest rates can often exceed the total cost and worsen the situation. Debit cards, however, prevent extra charges and only charge you for what you purchased.
Budgeting
We cannot emphasize enough the cruciality of budgeting. Budgeting is an excellent way to measure your accountability and remain prepared for a rainy day. It helps ensure you don’t unnecessarily spend money on things you can’t afford.
It reflects on your bad spending habits and lets you focus on your financial goals. Moreover, budgeting makes it easier to stay aware, pay off debt, prepare for taxes, and set goals. Not budgeting can lead to undesirable consequences such as not having an emergency fund, not being able to secure investment dollars, and the inability to secure loans.
Budgeting can, indeed, be a confusing process. Knowing economic standards, accounting for all incomes, considering long-term needs, and overestimating expenses can help set up a budget. You can consider using a spreadsheet to note down your monthly expenses.
Otherwise, you can also invest in budgeting software that can automatically do all the calculations for you and give you an analysis of your costs and savings. Furthermore, you might find the 50/20/30 rule of budgeting helpful. The formula states to spend 50% of your income on essential expenses, save 20%, and spend 30% on extra luxuries.
Remove Your Bank Card Numbers from Your Online Accounts
Online shopping has become a trend, with many apps and websites offering online payments and information-save options to encourage repeat purchases. It is easy to spend more when you don’t have to revisit entering your credit card number and other details. All you’ve to do is add items to your shopping cart, click checkout, and it’s done.
However, having your card numbers saved on various online accounts will only trigger your temptation to purchase more unnecessary items. That is why removing your bank account details from online websites and apps is crucial to controlling your spending habits. The extra effort you’d have to take to re-enter your details will give you time to rethink your purchase and often force you to quit.
Final Thoughts
There are primarily two ways to have more money: spend less or make more. And we all know that spending less is much simpler than making more. Yet, people struggle with saving up money. It is mainly because most people are not consistent or committed to their savings.
Either they don’t regularly set aside money to save or constantly take out money from their emergency funds to spend on activities that are not an emergency. Therefore, practice consistency and intendedness to become more efficient at your savings, and everything else will follow.