‘Rain, Rain, Go Away:’ How to Prepare for Life’s Unexpected Financial Disasters

Accidents, natural disasters and tragedies happen every day in our world. They are unforeseeable events that can consume us with worry and devastation if we are unprepared to cope with them.

Think about your own situation. Are you prepared to cover a costly car repair? How about a furnace that suddenly needs to be replaced, or what about cash to get you by following an unexpected job loss? If you have not prepared for a financial ‘rainy day,’  take action now so your finances can flower tomorrow.

“Many times losing a job, becoming strapped with a major health expense or a house repair can seem like a disaster,” said Joe Buhrmann, manager of financial security at COUNTRY Financial®. “If we’re not on guard, they can put us in a poor financial position. What can be worse, is without a rainy day fund on reserve, we might tap into our retirement account, get a personal loan or use a credit card to cover our bases. More often than not, those poor choices can put us on even rockier ground.”

Three ways to prepare for a financial ‘rainy day’:

Start small. Set aside three to six months of living expenses in a highly liquid, easily accessible account such as a savings account or money market fund. If you don’t have that amount already in your savings then start small. Begin by quickly accumulating at least $1,000 in your rainy day/emergency fund. Do whatever you can to accumulate a stash of money as quickly as possible. Cut back on non-essential expenses, such as eating out and clothing purchases. You could even hold a garage sale or sell some items online. Be creative in finding ways to quickly build up your emergency fund. Stay disciplined and commit to only using the fund in a true financial emergency.

Create a plan. After you have a solid start to your emergency fund, create a budget that includes additional savings to fully fund it. Budgets represent a critical means to your financial security, and if you have never created one before, plenty of tips and tools can be found online to get you started. Find something that works for you, whether it’s a written or digital worksheet or a budget tool offered on your bank’s website or through a phone app. The key is to create a budget, build in the monthly commitment to your emergency fund, and then to stick with what you’ve outlined in order to best manage your money. Once you’ve fully funded your emergency fund through budgeting, keep saving for something you will need in the future, or increase your retirement savings. At this point, saving will become a habit and you’ll want to keep it up.

It’s raining. Now what? Life happens, and you will experience an unexpected expense at some point. With your accessible emergency fund on the ready, you will no longer need to worry about how you will cover the cost or become tempted to use a credit card or other means to cover the expense. Simply withdraw or transfer the needed funds from your emergency fund to your checking account and pay what’s owed. After that, since your emergency fund has taken a direct hit, build it back up since your budget has a monthly savings commitment. You will build your fund, use it only for true financial emergencies and then save up once again to restore its previous balance. Instead of being a paycheck away from financial ruin, you will find peace of mind knowing you have the funds to cover financial emergencies as they arise.

The ‘rainy day’ fund is a critical component of financial security. When you have a fund such as this on the ready, you will be prepared for a financial storm. When the storm comes your finances will not get dried up and destroyed. Instead, your finances will continue to blossom because you took the steps required to plan ahead.

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