The Rainy Day Fund: How to Budget for Unexpected Emergencies

When it comes to your finances, a rainy day doesn’t refer to the weather. It’s used to describe those unlucky moments in life when you have to pay for something unexpectedly. Like when your car breaks down the same week you crack a tooth while munching on some hard candy.

It can be hard to anticipate when exactly you’ll need to see a mechanic or dentist, but there are ways to prepare your budget for these surprise expenses.

What Happens if You Don’t Budget for the Unexpected?

The unexpected becomes that much harder to handle if you don’t intentionally save for a rainy day. You might be able to cover something small with the extra cash you have left over after paying bills. But bigger emergencies can come with a price tag to match.

Most people can’t afford an unexpected expense of $2,500 or less. In fact, one in four Canadians and six in 10 Americans would have to borrow money to cover a $500 expense.

If you don’t have $500 available in an emergency, you can take out an emergency cash loan. These loans are designed to fill in for lacklustre rainy-day funds. Because you can’t always delay a dental emergency or auto repair until you can save up — sometimes, you have to pay these expenses right away.

You can learn how to borrow cash online in minutes using simple financial information you probably have on hand. Most lenders require contact details, bank account numbers, and employment information to assess your creditworthiness. If all goes well, you’ll be approved for an emergency cash loan to cover your unexpected expense.

Make it So That You Don’t Need an Emergency Cash Loan

While it’s nice to know that you can apply for an emergency cash loan when things go wrong, the best way to deal with the unexpected is with your own money. That way, you can skip the interest and finance charges that come with most loans and lines of credit.

So, how do you find this money in your budget? It comes down to sacrifice. You’ll have to cut out other expenses. But don’t worry—you don’t have to put all fun spending on hold. Experts say you should save about 20% of your income each month, splitting it between your rainy-day fund and retirement savings.

This advice comes from the 50-30-20 budget method, which suggests you cap your fun spending at 30% of your take-home pay. The remaining 50% should be enough to cover your essentials.

Sit down with your budget to see if you can align your spending with these percentages. If you aren’t quite hitting the mark, check out the list below. You can easily reduce your spending here or eliminate it entirely by trying out the substitutes:

Expense Substitute
Overlapping streaming services Kanopy, the free service available with a library card
Meal Subscriptions& Takeout Freeze batch-cooked meals to thaw when you’re tired
Gym Membership Workout outdoors and follow equipment-free fitness videos
Cell Phone Bill Reduce your plan and manage with less data

Hopefully, these suggestions get the ideas flowing for other ways to cut spending. You can transfer cash to a rainy day fund every month with the money you free up.

Over time, these savings will grow until they are big enough to handle what you least suspect — without the need for emergency loans.

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