Saving for a rainy day- we’re told over and over how important it is. Because it is. It may be all sunshine now, but rainy days are a guarantee. Regularly stashing away money in an emergency fund gives us a buffer when unexpected expenses pop up, or worse, when we lose part or all of our income. However, emergency funds are not infinite and will dry up if your rainy day turns into a rainy many days. As important as it is, saving should only be one part in our rainy day plan.
Build a Passive Income
Everybody loves the concept of passive income. The thought of having an income stream that is more or less guaranteed regardless of whether you can work, want to work, or do work seems magical. More to the point, when a rainy day hits, having a passive income stream will soften the blow of losing a primary income stream.
Of course, there’s nothing magical about building a passive income stream. Building a passive income takes lots of time, lots of money, or both. When you first start developing a passive income stream, you may be watching a few dollars flow in each month. However, stick with it and your income stream will grow. It will grow even faster if you reinvest your passive income on the ‘sunny days’. For more, check out a previous post on building passive income.
Develop Multiple Income Streams
Since building a solid passive income can take years, you should also diversify your active income streams. This might mean taking on an extra part time job or starting a small side business. You don’t necessarily have to devote much time to this side income. However, having it place give you a fall back option on a rainy day. If you do lose a job or need extra money, you can probably ramp up the amount of time you put into your second income. Having a second income may also allow you to invest more in a passive income fund helping that grow faster. For some ideas on a side gig, check out J Money’s growing roundup on side hustle ideas.
Develop Marketable or Profitable Skills
If your rainy day comes in the form of job loss, having marketable or profitable skills will help your rebound. These may be skills that help you find a new job or skills that help you make an income on your own. You might develop these skills while working at your side gig, taking courses on the side, or teaching yourself. The range of skills that you can pick up is unlimited. It might be teaching yourself how to code or web build. Or perhaps you work on your wood working or writing. Or you could pick up some extra credentials in your career field. Just resolve to never stop learning.
There’s the cliche ‘it’s not what you know, but who you know that counts.’ Of course, this is only partially true (or else I wouldn’t recommend developing marketable skills). However, cliches exist for a reason, and who you know can help when times get rough. You never know who might help you get a new job, let you know about an opportunity that’s just right for you, or help you out with a side gig. So network! Get to know new people, and get to know people better.
Two cautions, tho. First, do not approach every relationship as a networking opportunity! Your true friends and family are not networking
targets er… contacts, so don’t treat them as such. It very well may be that they do in fact point you toward a new job or opportunity, but this is not the point of your relationship.
Secondly, remember that networking is a two way relationship. Look for opportunities to help others in your network. Perhaps you know of an opportunity or contact that would really help out someone else. Let them know!
Mustard Seed Money has a great post going more in depth on the importance of networking.
Live Below Your Means
Last but not least, surviving a rainy day depends on you living below your means. Many people wait until a rainy day hits to ‘tighten their belts.’ This is too late. For one, there are too many ‘fixed expenses’ that can’t be adjusted instantaneously. It’s not practical to move to a smaller house, or switch to a smaller car as soon as an emergency hits. These adjustments in themselves cost money (that you won’t have), but also can take time (that you won’t have). So stick with houses and cars that are well below your means. And avoid financing your vehicles so you’re not stuck with extra payments when money gets tight.
Learning to live frugally also takes time. You quickly grow accustomed to your lifestyle, and drastically downsizing your lifestyle will make your rainy days seem that much worse. So make a habit of living frugally. Avoid mindless consumer spending. Oh, and avoid credit card debt like the plague.
Living below your means now will mean that you’ll be able to live on a smaller income later if you need to. Again, it also means that for the time being, you’ll be able to stash more money in your rainy day fund and your passive income fund.
While I do strive to only write accurate information and dispense valuable advice, I am not a licensed financial adviser. All information is based solely on my personal experience and personal research and should be treated as such. Find out more.