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11 Legitimate Ways to Build a Rainy Day Fund

Worried about your ability to save up in case of an emergency?

It’s not always easy, but there are ways to build a rainy day fund you can dip into should unexpected costs arise.

According to personal finance expert Wayne Bogosian, most Americans living paycheck to paycheck struggle with saving the necessary $1,000 to $5,000 for a rainy day fund.

"If you're living close to the bone, paycheck to paycheck, you will likely build your rainy-day fund before you build your emergency fund," Bogosian told Bankrate.com.

Rainy day funds can and should cover unexpected expenses, like car repairs or medical bills, while an emergency fund should keep you afloat for three to six months, in case you lose your job or suffer a bigger setback.

Even if you can only put a little away at a time, don’t let this stop you from using a smart savings strategy. We’ve got 11 tips that can help you start saving up:

Planning for Your Rainy Day Fund

1. Budget, Budget, Budget

You’d be surprised by how many people don’t draw up a budget for their everyday expenses - let alone saving for unexpected ones.

But if you want to save, budgeting is the place to start - even if it seems like you don’t have much money to work with.

“Making a budget isn't difficult, but it can seem daunting if your finances need a big overhaul and you're desperately trying to build up your net worth,” explains Jessica Moorhouse at Mint.com’s blog.

Not sure where to start? Moorhouse suggests creating a few different spending “buckets” to help you visualize where your money should go.

“Divide your income into three piles: one to pay your bills and basic necessities with, one for savings, and one just for fun,” Moorhouse writes. (Even savers on a budget should have at least a little fun.)

2. Cut Extras

If you don’t have an easy way to increase your income, then you’ll have to start with cutting out extra expenses.

“Free up extra money for savings by taking a red marker to your budget and trimming as much fat as possible,” Paula Pant suggests at The Balance.

Anything you can count as an “extra” expense should go. Think premium cable, eating out multiple times per week, or the occasional cab ride home.

This tactic requires discipline, but it can be done. Just remember to balance this advice with realistic budgeting, so you have an easier time living with less.

The point is to make your life easier down the road and in case of emergency - not to make your life miserable right now.

3. Ditch Credit Cards

Many people rely on credit cards when they get in a pinch with their cash flow. This can cause major financial problems, says finance expert Alexis Boncy.

“Credit cards are deceptive,” Boncy writes at The Week. “Sure, they'll cover an unexpected bill, but unless you can pay off your balance each month, the interest will quickly mount and create more debt at a time when you're already strapped for cash.”

Rather than accumulating debt on a credit card, think about moving the money you do have saved into your checking account.

It’s a different mindset than most Americans have toward money - but it’ll keep you from paying high interest rates on money you don’t have.

4. Avoid the Stock Market

While it might be tempting to invest your savings in a money market fund tied to the stock market, that could put your savings at risk, says Boncy.

“...Emergency funds above all are meant to be both stable and accessible — the money you can count on being there when you need it,” Boncy writes.

While a rainy day fund is an investment of sorts, it’s not one you can risk in an unpredictable market.

You should be able to withdraw funds from your savings and move it to your checking account within a few business days.

Earning your Rainy Day Fund

5. Make Saving a Priority

If you’re going to earn - or save - money for a rainy day fund, then you have to change your priorities.

Rather than waiting to save left-over income at the end of the month, make saving one of the first things you do when you get your paycheck, suggests Pant at The Balance.

“Once this money is safely in your savings account, you won’t be tempted to spend it on all the other things that tend to crop up,” Pant writes.

If you can think of this as “paying yourself first,” it’s easier to view your savings strategy as a long-term investment, rather than a punishment.

6. Save Your Raise

Whether you get a yearly raise or a hefty tax return, put any windfall toward your savings goal.

According to Spencer Tierney, a finance writer for NerdWallet.com, your tax refund is a great place to start.

“The average refund is in the thousands, which can give a good boost to your emergency savings,” Tierney writes. “When you file your taxes, consider having your refund directly deposited into your emergency account.”

If you follow the same strategy for any “extra” money that comes your way, you’ll cross the finish line for your rainy day fund sooner than planned.

That means you can start putting money away for something fun, instead!

7. Sell Things You Don’t Need

Downsize and declutter by getting rid of the extra things in your life.

Not only is this a great way to scale back on the number of possessions crowding your storage space, but it’s an easy way to pocket “extra money,” says personal finance writer Trent Hamm.

“All of that stuff stored in the closet is money just sitting there gathering dust,” writes Hamm at The Simple Dollar. “And it’s particularly painful when you have difficulty making ends meet or are struggling valiantly to pay off debts.”

Selling items like gently-used clothes, DVDs and other electronics, furniture, and books can help you accumulate more money for your rainy day fund - and cut down on your spring cleaning to boot.

8. Get a Side Hustle

Whether you waitress on the weekends, land a retail job, or become a mystery shopper, sometimes the fastest way to saving more money is to pick up a side gig.

If you have expertise that you can’t put to good use at your current job, online consulting or tutoring could be a way into major money.

According to DailyWorth.com, sites like The Second Shift and HourlyNerd regularly help experienced freelance or contract workers earn extra income.

“It’s a way to resume your career, reboot your skills, meet interesting people, do stimulating work, and make additional income,” Christine Schuldt, a former marketing executive who found success in these online job boards, explained to DailyWorth.

Just make sure your side hustle doesn’t compete with the hours you’re putting in at your day job.

Stashing your Rainy Day Fund

9. Automate Your Savings

If you’re serious about building up a rainy day fund, automating your savings will help you get over that initial mental hurdle so many of us face: the importance of “paying yourself first.”

“When you make deposits into a savings account automatically and regularly, you don’t have to think about it — the money is deposited before you have time to worry about expenses or how much money will be left over,” explains Jeremy Vohwinkle at The Balance.

“Once you get used to it, you might not even miss the money,” he adds.

With new savings programs like Digit and Chime, it’s easier than ever to trick yourself into saving more money.

These automated savings accounts deposit small amounts of money into a separate account - and, in the case of Digit, they do so in such small increments that you don’t even notice they’re gone.

10. Use Interest-Bearing Accounts

Although high-yield savings accounts slashed their interest rates during the recession, it’s not impossible to find banks that offer a good interest return on the money you put away for your rainy day fund.

Online savings accounts have interest rates that hover around 1%, while local credit unions can often offer a better rate than national bank chains.

Take a look at NerdWallet’s list of the best high-yield online savings accounts for 2017 to find the best account for your needs.

11. Open Multiple Accounts

Saving money is all about strategy.

And, in this case, opening multiple savings accounts can be a good way to break the bigger financial goal of a rainy day fund into a smaller, more manageable goal.

Think about it - how much easier is it to save $500 than $3,000?

That’s why personal finance experts like Erika Torres recommend opening savings accounts tied to specific financial goals.

“Our multiple saving accounts include car down payment fund, emergency fund, vacation fund, baby fund (to help cover my paycheck during maternity leave), Christmas present fund, car insurance fund, etc.,” writes Torres at Business Insider. “We are constantly saving for these items throughout the year and designate a pre-set amount of money to each savings account on every payday.”

If saving large amounts is hard for you, try using one savings account to save up between $300 and $500 - then roll that amount into another account with your rainy day fund.

Don’t worry if it takes you one or two months to set aside $500 without feeling the pinch - just feel proud when you roll that amount into your account and see those dollars accumulate into a sizable cushion.

Saving money for emergency expenses is never easy, but with a little bit of strategy, you can tackle your goal to build a rainy day fund.

What’s more, a sizable emergency fund should help put your mind at ease - you now have money set aside should unexpected expenses crop up.

Remember: that sense of security is why you’re working so hard in the first place!

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