Preparing for the Rainy Day
How a “rainy day fund” can be the difference in whether you make it through the next storm or get sunk.
Americans of all ages are continually seeking ways to find financial stability both now and later on in their life. When curating a lifelong financial plan for action, these desires for stability are what will ultimately determine our respective financial disciplines.
It is often our financial discipline as people that reveals just how much capacity we have to create the standard of living we seek.
In essence, we are all searching for a humble balance between our willingness to sacrifice and our ability to do what we aspire to do.
We are all striving as humans to provide a livable and nurturing foundation. A foundation where there is opportunity to achieve your life goals, and ultimately, afford to experience life on your terms.
Almost all of us, both young and old, believe that this is best achieved by leading an honest and hardworking career. A career where we succeed in eclipsing a level of earnings that allows us to lead a certain standard of life.
In all senses of the word, we spend the majority of our lives striving to develop necessary skills to earn a means for living.
A Conflict of Interest: As many successful retirees can attest, the ability to create a reality such as this is often a direct result of being able to sacrifice now for greater benefit later.
As we have become more dynamic as a society, the importance of disciplined and strategic financial behavior is more apparent than ever before.
However, the discipline required to achieve complex understanding as it relates to finances has never been higher.
As we have become more dynamic, we have also become a society far more likely to consume more than we produce.
As an appetite for abundance has continued to grow rapidly in our culture, so has our access for enhancing our standard of living. As a collective, we tend to live at or above our means financially.
Ultimately, we have become increasingly convoluted in our judgement for what we can afford, and how we plan to sustain our living standard.
Preparing for the Storm: We are in constant conflict with our interest to save for the inevitable rainy day. Neglecting the fact that it is one of the only ways to ensure a brighter tomorrow.
Instead, we opt to indulge in the infinite availability of things that provide a level of perceived convenience. Which we often wrongly believe will allow us to perform better and excel.
All day we are being penetrated by efforts to sell us goods and services which we believe will enhance our lives. Every minute, this is taking place on channels that now exist in the palm of our hand and all around us.
As new opportunities for living an enhanced life have continued to accelerate in our environment, the cost of living has continued to rise. Surprisingly enough, so has our willingness to raise our standard for it.
The Cloudiness of Today: Circumstances of today’s economic landscape have made it easy to find yourself in a financially-leveraged position. Consequently, this has left many individuals desperately unable to save.
Of course, this would also suggest that they could not afford to participate in the recent advance of opportunities for gained financial stability.
By indulging in frivolous day-to-day conveniences, we are quite literally sacrificing our financial wellness later for the deceiving comfort of today.
Despite significant advances in the markets over the last 10 years, individuals still struggle in establishing plans to capitalize financially.
By having no aptitude to save, individuals often do not ever make it to the next stage of developing the aptitude to invest for a stable future.
Carrying an Umbrella: If you have ever been caught in a rainstorm, you probably understand the reality that you often do not ever have an umbrella when you most need it.
In the moment, it becomes the most dependable means for providing yourself comfort. A small contraption that you keep in the trunk of your car and often forget even exists during the sunny day-in and day-out of routine life.
Unfortunately, far too many people find themselves in a financial situation where they forgot to put the umbrella in the trunk. All the while, continually engaging in more and more costly behaviors. Living in what they think to be endless sunshine.
This scenario is representative of the very pitfalls many people face in their financial life.
Unfortunately, you cannot purchase a rainy day fund at the store for $19.99 like you can an umbrella.
Instead, through setting limits on spending and making a concerted effort to understand your true means for providing a standard of living, you may begin establishing habits to save for a rainy day.
Walking Between the Raindrops: The general rule of thumb for a typical rainy day fund is to strive to always maintain 3–6 months of living expenses in savings.
On the modest end, it is also common to strive to keep at least 1 month of living expenses saved per dependent you have.
While these general rules provide an achievable framework for most individuals, the ability to save even more would also be a sound decision.
Striving to build a year’s worth of savings to be kept in a rainy day fund, either in a standard savings account or money market account, provides an even further insulated foundation for living a comfortable life.
Keeping 1 year of living expenses in a highly liquid savings or money market account is a utility for preventing financial catastrophe.
A utility that provides peace of mind for those of us who fear facing a financial downpour unprepared.
Even further, if you are fortunate enough to have excess savings of a whole year of living expenses and not have to depend on it, you will find yourself in perpetual position to strike when opportunity for financial gain presents itself.
The Bottom Line: Of course, we all need money. But why do we feel we need it?
Far too often we feel as though we need more money not to reinforce our foundation for a stable financial life, but to subscribe ourselves to financial commitments which we believe will increase our overall quality of life.
It has become increasingly difficult for aspiring professionals to differentiate only the products they need in order to live and execute an efficient financial plan.
During this increase in difficulty to differentiate, it has become abundantly easier to make impulsive financial decisions that take you far off track over time. Ultimately, leaving you vulnerable to get caught unprepared in a financial downpour.
You hear the saying all the time:
“It is better to have it and not need it than to need it and not have it.”
How do you make the necessary sacrifices to have it? By living a life where you do not need all of your financial means.
How do you live a life where you do not need all of your financial means? By understanding that what you are capable of having is not always what you need.
By understanding these terms, we may put ourselves in a better position to account for the storm when it arrives unexpectedly. And furthermore, put ourselves in position to capitalize on securing a life of sustained financial stability.
