Cheryl Fleming, GRI, ABR's Blog
Whether you call it a "rainy day fund" or a "financial cushion", having some money set aside for emergencies or unexpected expenses can help keep life on an even keel.
Although health insurance and a homeowners' policy can provide a measure of protection, insurance deductibles can take a large bite out of your bank account.
In addition to all the predictable expenses that accompany home ownership, mechanical systems like furnaces, hot water heaters, and air conditioning units have a way of breaking down at the most inopportune times. Another crisis that many people aren't prepared for is the potential loss of a job. When families don't have money set aside to weather the storm of an unplanned income loss, then there's no "safety net" to cushion the fall.Strategies For Saving MoneyThe good news is that there are plenty of ways to build up financial reserves, but it often requires self discipline, a new set of habits, and the intention to make it happen. One of the first steps to putting some money aside for a rainy day is to open up a separate bank account. If you put extra money in your regular account -- or (even worse) keep it around the house -- chances are it will get spent pretty quickly. However, if it's deposited into a separate account that's designated for emergencies, unexpected household expenses, or even a college fund, then it'll stand a greater chance of being left alone until it's needed. Putting money aside does take some doing, but it can contribute to your family's financial security and ability to do things that are important to you.
If you have a tight budget, you're probably wondering where this extra money is going to come from! Sometimes, the very act of developing a written budget can provide you with clues and ideas for reducing your expenses. You'd also be amazed at how much the savings can add up when you comparison shop, buy in bulk, use coupons, negotiate lower interest charges on your credit cards, quit smoking, car pool to work, cut back on restaurant food, and make up your mind to live just a little more frugally.
Depending on how committed you are to creating a financial cushion, you could also make the fund grow faster by depositing a percentage of Christmas bonuses, tax refunds, manufacturer rebates, salary increases (raises), and other sources of extra income. Additional ways to beef up your financial safety net could include getting a part-time job, doing freelance work, holding a garage sale, or selling unwanted items through ads or flyers. When you pay off credit cards, car loans, or other debts, you could also redirect some or all of those monthly payments into your "future needs fund."
Whatever you decide to call it, it's nice to know that there's some extra money on hand for unexpected expenses, emergencies, potential job losses, college tuition, weddings, family vacations, home renovations, nursing home costs, or even retirement.
- Significant price variations: Getting multiple quotes can help put you in the driver's seat when it comes to controlling household expenses. It's all too easy to overpay on a product or service when you have no points of comparison. Even if you're just saving $50, that's hard-earned money that can be saved, invested, or spent on something else you and your family needs. It's amazing how much of a price variation there often is between providers of similar services. When you rely on one contractor, retailer, or landscaper to deliver the most value for your money, you're failing to look at the full range of choices. However, when you factor in other prices, customer service policies, payment terms, and features, then you're giving yourself the information you need to make the most economical decision. In many cases, that can translate into hundreds of dollars of savings, enabling you to keep more money in your pocket or bank account.
- Comparing features and benefits: Once you start comparing things like customer reviews, price differences, guarantees of satisfaction, and value-added features, then one contractor, service provider, or manufacturer may quickly emerge as the clear winner. When it's an individual you're considering, such as a handyman, house cleaner, or plumber, things like experience, references, attitude, and work ethic can also make a big difference in your level of satisfaction.
- Knowledge is power: One of the advantages of reading online reviews, getting at least three estimates, and comparing different proposals is that you become more knowledgeable about what you're going to be spending your hard-earned money on. This not only helps you make an informed decision, but it gives you the knowledge to communicate your expectations more clearly to the person or company who ends up getting your business.