Do you Have a Rainy Day Fund?

One of the best pieces of advice I have ever been given is always to "expect the unexpected." It sounds crazy to always picture bad scenarios, but you need to remember that bad things happen all the time and if they catch you unprepared, they could literally ruin your life. Think about that old high school friend who was in an accident and whose family spent all they had to cover medical expenses. They even had to sell their house. Now they are homeless. What about your coworker who was retrenched unexpectedly and had to move back home with his parents? Or that neighbour who took an emergency loan five years ago and she is still repaying? When you are prepared for crises, you weather them better. This is why you need a rainy day fund.

Financial advisers will tell you to always have enough liquid assets to cover up to six months of living expenses during an emergency. It sounds like a difficult task, doesn't it? You're paying rent, you have mouths to feed, you might even be trying to put a little away for retirement - putting aside money for something that might not even happen seems untenable. However, it's not as difficult as it seems. 

Here are a few tips on how to start and maintain an emergency find

1. Set a Goal - While experts recommend about six months of your living expenses, only you can determine what amount you feel would work for you. Examine your life and finances and use that to settle on a given number. Aside from that, having an actual goal gives you something to work towards and you will be more likely to actively pursue it.
2. Start small - You don't want to get overwhelmed by how much of your income you are "losing" to your rainy day kitty and then stop in the middle. Take a gradual approach, even a hundred shillings each week and increase this. Instead of adding strain to your budge, identify areas where you could cut spending and redirect it into your fund.
3. Discipline - You need to be strong willed in order to make sure you don't misuse this money. Decide what qualifies as a "real" emergency. If a situation doesn't qualify, look for an alternative source of funds for it. If for any reason you have to dip into these savings, replenish it as soon as you can
4. Stick to a schedule - Make it a habit to make deposits into your fund. The frequency doesn't matter as much as making sure you stick to your schedule.
5. Make it inaccessible - Self-control can be a tall order, especially where your money is concerned. Thus, avoid temptation and make your rainy day fund reasonably unobtainable. Do not put it in your mobile wallet or have an ATM card linked to it. Locked savings accounts are a good option because they limit your ability to retrieve it.

Start your rainy day fund today. In case of an emergency, you'll be so glad you did it.