How to Build a Rainy Day Budget

 

 

 

 

 

Many Americans know the importance of building an emergency fund, but few are able to do so successfully. Research from the AARP found that 53% of American households lacked an emergency savings account. 

Not only are Americans unprepared for emergency expenses, but most households would struggle with an unexpected $400 expense, according to the Federal Reserve. These findings indicate that few people have invested in either a rainy day budget or an emergency fund, relying instead on loans and credit card debt when unplanned expenses pop up. 

It doesn’t have to be painful to build a rainy day budget or an emergency fund. We’ll walk you through a few tips to illustrate how to save money, as well as provide a budget calendar to help you stay on track with your savings goals.

What is the purpose of a budget?

A rainy day fund is slightly different than an emergency fund, but the two often get conflated. A rainy day fund is something you can draw from to pay for smaller expenditures – if a major appliance in your house needs to be replaced, or if your child needs braces, for instance. A rainy day fund is important to have to avoid going into debt to cover small inconveniences that will pop up and disrupt your careful budgeting. 

An emergency fund, on the other hand, is your safety net in the event of a big financial emergency; loss of employment, illness, or a global recession, for instance. Most experts recommend building an emergency fund with at least six months’ take-home pay, e.g., your paycheck less taxes and other obligations for benefits and retirement. 

How much do you need in your rainy day and emergency funds? The numbers vary depending on your living expenses and income level. “To cushion against a simultaneous spike in expenses and dip in income, a middle-income family needs about $5,000 in a rainy-day fund but has just $2,000 — a gap of $3,000. Lower-income families need about $2,500 but have just $700,” reported the New York Times. The AARP recommends a slightly higher budget of $10,000 – $50,000 for your emergency fund.

Typically, a rainy day fund is smaller: between $500 and $2,500. There’s no amount too small to start with when you begin saving money. Start somewhere, and make saving a habit – here’s how.

How to save money

If you’re living on a shoestring budget, building both a rainy day budget and an emergency fund can feel daunting. Most experts suggest focusing on your existing expenses first. 

“Creating a rainy day savings strategy starts with getting a handle on any future expenses. For most people, monthly expenses such as house payments, utilities, insurance and groceries stay steady. Other costs are less frequent but not technically emergencies. Make a list of the expenses you’ll probably have to pay in coming years. In addition to car maintenance or house repairs, this could include kids’ braces or veterinary bills,” wrote Nerdwallet

A good way to track your expenses is to use a budget calendar. Use a budget calendar to log every bill due: from utilities to rent or mortgage to paycheck. Log each amount in your calendar to see what’s going out when. 

From there, you can start to estimate how much you need in your rainy day fund and in your emergency fund. For your emergency fund, The Balance recommends that you set a goal and then put aside a small amount each month. “Figure out how much money you’d like to have in your fund, then work backward from there. Divide the amount you’ll need to adequately fund your account by how much you can afford to put aside each month. Then, you’ll be left with the number of months it will take you to reach your goal.” 

When you first start out, you may need a little lift to help get your savings off the ground. Consider working with a community like LiftRocket.

This article is contributed by LiftRocket.

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How to Have Fun (Not) Traveling this Summer

Confession: Traveling during the busy summer season just isn’t for me. In our modern age filled with digital nomads and travel hacking devotees, it’s almost a sin not to be daydreaming about the next summer vacay.

But in my humble opinion, summer travel can be a bit unpleasant. Of course, it largely depends on the destination. But with the swarms of tourists at popular locales — not to mention prices for airfare, hotel stays, and tourist attractions spike — I’d rather stay local during the summer. I’m willing to swap jetting off to different countries for a leisurely bike ride around my neighborhood.

If you have a similar mindset, here are some ways to make the most of a non-traveling summer.

Go on a Staycation

Staycations are terribly underrated. You can use them as an excuse to explore your current town. I’m fortunate enough to live in Los Angeles, where there’s a bounty of art openings, food and music festivals, and delicious eateries popping up all the time. When I spent my summers in Chicago, there were free neighborhood street fests every weekend, concerts at Millennium Park, free yoga classes in the park, and neighborhood gatherings.

I moved a little east of Los Angeles city proper about a year ago, to a small nature area with a population of about 10,000. There are chili cookoffs, gorgeous mountains, and many hiking trails. I’m also looking for a bike to explore my new ‘hood.

Check the calendar section of your town’s website to keep up to date with all the fun, free activities in your town or city.

Create Mission-Based Adventures

You can create what I call a mission-based staycation, such as trying out the best hikes in your area, tasting one ice cream (or a few!) at every ice cream shop in town, or reading every book by your favorite author at the local library.

Some examples: My friend Mel decided to have a  “year of museums,” where she’ll visit different museums and art happenings around town. My other pal Lindsay plans on going on one hike a month throughout the year. Fun can be found right under your nose!

Make Small Tweaks

You don’t need to make a big plan to enjoy the summer months where you live. Try switching out your habits. For instance, try biking to the park instead of driving there. Or enjoy breakfast out in your yard instead of at your dining table with the curtains drawn. You’ll be surprised at how the small changes can really help pave the way to new experiences, or a new way of looking at things. It could even make feel like you’re somewhere else.

Swap Homes with Friends

See if any pals and family members in other parts of town are up for swapping homes for a weekend. You can either do it Airbnb-style or stay with them for a few days — that way you can change up the scenery and enjoy a new neighborhood.

I have apartment swaps planned with pals who live in Hollywood and West L.A. It will certainly feel like a mini-vacation!

Try a No-Spend Weekend

I experimented with a no-spend weekend a few years ago, and not only did I save money, but it was fun! Before I embarked on the journey, I set up some ground rules: I could stock up on food to last me through the weekend, I could use my public transit card, and I was allowed to spend any gift cards. I planned my weekend around free activities and using up my gift cards.

If forgoing doling out cash on the weekend is too tough for you due to social commitments and general temptations, do a test run during the workweek. Because you typically have less free time and social outings, you won’t be as tempted to spend.

Ramp Up Your Side Hustle

If you’re looking to boost your cash flow, summer is ripe for seasonal gigs. Take advantage of the fact that more people are traveling to snag jobs pet sitting or tending to a neighbor’s plants. You can also scoop up more gigs as a rideshare driver or brand ambassador at outdoor festivals. In summers past, I’ve sat for friends’ furbabies and proctored at a local university during the summer session.

I work my buns off during the summer so that I save up for stuff I want, and aim to less some time off during the holidays. Co-worker taking time off? See if you can take extra shifts. Or if you’re a freelancer or gig economy worker, see if your clients are in need of extra help during the summer months.

Save for Off-Season Travel

Rather than put everything on a card and pay it off post-travels, have the money saved up front.  Peak travel seasons for most places tend to generally be June through August. If you’d like to travel during the fall or spring, figure out exactly how much you’ll need by when, and get to work saving your beans.

Besides a short camping trip in June, I only travel in the off-season. I have a trip to the East and Midwest scheduled for the fall and am steadily saving for a trip to Southeast Asia next year. I’ve committed to saving a set amount each week and will bolster my goal with any “extra cash” I earn.

Remember: Staying local doesn’t have boring or induce cabin fever. By getting creative, putting on your exploration cap and making small tweaks, you can have a blast this summer in your city!

This article was originally published at HiCharlie.com

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Creative Ways to Shop on a Budget

blue and brown tote bag

A survey by Gallup in 2019 found that only 32% of Americans maintain a household budget. Roughly half of Americans are living paycheck to paycheck, meaning many of us have to get creative in how we shop for things like groceries, clothes, and entertainment. 

Living on a shoestring budget can be stressful, but it is possible with some of these creative tips to shop and make the most of what you have.

Grocery shopping on a budget

Food tends to be one of the biggest spending categories in anyone’s budget. The USDA estimates that Americans spend an average of 6% of their budget on food; 5% of income also goes to dining out. How can you stretch that grocery shopping budget to go even further?

First, time your shopping trip to capitalize on sales and promos:

Wednesdays: The middle of the week is often when grocers release their weekly circular. “You’ll have first dibs on sale items for the week ahead and, if you’re lucky, the store may still honor price reductions on items you forgot to pick up from the previous week’s sale,” says one expert.

Avoid Tuesday and weekends: Weekends tend to be busier as people shop on non-workdays. Tuesdays can also be crowded as other shoppers try to take advantage of last week’s expiring deals, and therefore sale items go quickly. 

Shop late or early: The hour before closing is when some grocers reduce prices on bakery items or produce items that won’t last until the next day. Early in the morning is also when there is less competition for sale items. 

Next, before you head to the store, download an app. Not just any app, but one that gives you discounts: try Food on the Table, an app that lets you type in your food preferences and then generates a list of recipe options based on current promotions at your go-to grocery store. Or, try Ibotta, an app that lets you retroactively apply coupons to items you purchased by scanning your receipt and claiming deals.  Many grocery stores also have apps that deliver exclusive offers and digital coupons. 

Finally, put your dining out budget into your grocery shopping budget. A meal at a fast-food restaurant costs around $8; if you stop eating an $8 lunch every day during the workweek, you can save $40 a week ($160 a month!). 

How to budget for an apartment

Rent is a big budget item for most people, and there are lots of hidden costs in budgeting for an apartment. Whether you’re on the hunt for a new lease or looking to reduce your utility costs and other apartment expenses, there are a few key things to consider when budgeting for your apartment. 

First, if you’re looking to sign a new lease, try to find an apartment that’s close to public transportation. Longer-term leases (a year or more) tend to be cheaper, as the landlord doesn’t have to search for a new tenant or spend on renovations as often. If there are fixes that need to be made, offer to do them yourself in exchange for a discount on the security deposit. 

If you’re in an apartment and hoping to save on utility costs, go beyond basic steps like turning off lights and turning down the heat. Think about turning off the devices that consume energy in a passive way, like your microwave and water heater that you aren’t using constantly. Winterize your apartment to cut your cooling and heating bills (winterize is a bit of a misnomer, as many of these steps can also keep your apartment cool in the summer). And, avoid running your energy-intensive appliances – washing machine, dishwasher, or dryer – during “peak hours”. Electricity companies tend to discount rates during the night when fewer people are using their grid.

Thrifting and other shopping ideas

What about other expenses: clothes, gifts, and entertainment? There are creative ways to shop on a budget for these items too. 

Thrifting is an obvious choice for saving your clothing budget. Many shoppers also turn to fast-casual brands like H&M and Forever 21 – but be aware that those retailers may be more expensive in the long-term. Spending $10 on a t-shirt that lasts fewer than 10 wears is worse than spending $50 on a shirt you’ll own forever. “Unless it’s practically free, you’re better off buying clothing items from good brands with a reputation for well-made items,” wrote The Simple Dollar.

Look to see if clothes are well made by checking the seams and material. Seams on a good quality item will be perfectly straight, with no dangling strings; any patterns should match up well. The material should be higher-quality. Look for natural fibers and blends like wool, and avoid synthetics like polyester. 

For gifts, go for something thoughtful rather than expensive. Find gifts that are unique to the recipient and require time, rather than cash. For instance, give someone the gift of time by babysitting or hiring a house cleaner. Give your family member a recipe book of meals from your childhood. Or, start a new tradition – holiday cookie-baking, for instance – that leads to memories rather than things. 

Shopping on a budget isn’t always easy. Sometimes, what you really need is a little Lift to cover a shortfall or meet a financial emergency. 

This article is contributed by LiftRocket.

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