Financial Planning Essentials Series
8 Tips to Replenish Your Rainy-Day Fund
As we all know, 2020 has been a rainy-day year. Many people have experienced significant medical and financial hardship. We are beyond thankful for the amazing essential workers and deemed it appropriate to spend time on the financial planning essentials. One of the first building blocks of any financial plan is establishing the old emergency cash reserve, aka rainy-day fund, for unexpected emergencies. When that random rainy day (or year) has come and gone, along with your rainy-day fund, it is now time to push up your sleeves and get back to work to rebuild this reserve. Following are eight tips to consider if 2020 has been your random financial rainy-day year:
- Create a budget, a review of your income, less your expenses.
- If you have a budget, but you have not been reviewing it regularly, it is time to do so.
- After updating and checking your income and expense forecast, separate your fixed expenses from your discretionary expenses.
- Evaluate what discretionary expenses can be temporarily eliminated or reduced. Following are a few examples:
- Reduce or eliminate dining out and begin meal planning in advance of going to the grocery store.
- Evaluate all entertainment and subscription expenses.
- Reduce or eliminate travel expenses.
- With mortgage interest rates at all-time lows, consider refinancing your mortgage to reduce your payment and free-up cash flow.
- Have a formal audit completed on all insurance policies to ensure they are cost-effective relative to your needs.