getty
Life is full of unpredictable twists and turns, and preparing for rainy days is an essential aspect of financial planning. Whether you're managing personal finances or running a business, having a solid strategy to make your money last during challenging times can make all the difference.
Below, 16 Forbes Finance Council members share a collection of valuable tips and anecdotes from both business and personal perspectives, offering insights into how individuals and entrepreneurs can build resilience, create sustainable financial habits and navigate unexpected financial setbacks. By learning from real-life experiences and adopting practical approaches, you can fortify your financial foundation, ensuring that you're prepared for any storm that may come your way.
1. Use A High-Bearing Interest Account
Keep your money in a high-bearing interest account, always. This will help fight inflation until that rainy day comes when you need it most. - Zachary W. Herzog, Wolfgang Capital
2. Don't Spend More Than You Make
Stop spending more than you make. Once you get into the habit of spending more than you earn and living a lifestyle above what you can support, it's hard to stop—turning into a slow descent of financial ruin. I can't count the number of clients we have come through the office who earn good money and should be financially set but are drowning in debt and can't accept they need to downgrade their lifestyle. - Jay Kirkwood, Secure Financial Management
3. Keep Six Month's Salary In An Investment
To make your money last on rainy days, it is important to have a safety net fund or a reserve fund to keep monies to meet unexpected expenses and provide financial support during a difficult period. I consider a minimum of having six month's salary stashed in an investment that can be easily accessed when needed, but out of reach when not needed. - Odiri Oginni, United Capital Asset Management Limited
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
4. Create A Non-Negotiable Expense
Establish an emergency fund by regularly setting aside a portion of your income as a non-negotiable expense. A business experiencing a sales downturn can leverage a well-funded contingency reserve to navigate the period without layoffs or operational compromises. Start saving early and consistently for a financial buffer against unexpected expenses or income disruptions. - Sean Brown, YCharts
5. Pay Attention To Your Spending Habits
Unlike our “friends” in Congress, paying close attention to spending is critical. If or when income is disrupted, containing spending while simultaneously having six months of fixed expenses available is critical to rainy-day success. - Anthony Williams, Mosaic Financial Associates
6. Assess Your Risk Tolerance Prior To Investing
Assess your risk tolerance prior to investing; it removes all emotion from the process. This can also prevent the classic mistake of buying high and selling low. Make your money last by continuing to invest prudently, avoiding the trap of chasing the latest fads and keeping calm during a market downturn. - Sonya Thadhani Mughal, Bailard, Inc.
7. Pay Yourself First
Make savings a priority—pay yourself first. Put a line item on your budget for savings and have that amount automatically deducted from your paycheck and deposited into your savings or investment account each month. Forced savings that you don’t see will be less likely to be spent. With interest rates on Money Market funds around 5%, you can earn some good interest on the deposits. - Aviva Pinto, Wealthspire Advisors
8. Eliminate Debts
For people who are close to retirement age, plan your monthly expenses as if you (and your spouse) are living on your estimated social security check each month. Eliminate debts with costly interest rates, eliminate redundant expenses and consolidate other expenses like mobile phone costs. This way, your retirement savings can continue to grow for a longer time period. - David Samuels, DrFirst, Inc.
9. Identify Areas Where You Can Cut Back And Save
By creating a realistic budget and consistently monitoring your spending, you can identify areas where you can cut back or save. This disciplined approach helps you build a financial cushion, enabling you to handle unexpected expenses or income disruptions without resorting to debt. It also allows you to prioritize saving for the future, ensuring long-term financial security. - Jose Rodriguez, Got Credit?
10. Consider Alternatives
Be intentional with your savings putting away monthly revenue for a rainy day. In today's economic cycle, you can take advantage of the higher interest rates and consider other cash alternatives to have your money work for you. Consider a high-yielding savings account, short-term CDs or opening an investment account with a financial advisor to utilize Money Market or short-term Treasury Bills. - Letitia Berbaum, The Zandbergen Group
11. Focus On Needs And Not Wants
Rainy days are inevitable and life happens. To make your money last for rainy days, reduce your propensity to spend on non-essentials. Focus on needs and not wants. Determine your runway. Have a budget and stick to it. Practice delayed gratification. Back in the day when I was low on cash, I avoided going to malls to prevent window shopping which may lead to emotional and accidental purchases. - Oluwatoyin Aralepo, Mastercard Foundation
12. Create Separate Accounts And Title Them
Create separate accounts and title them for exactly what the money is for. For example, "my baby fund," "my travel fund," "my down payment fund" or "my emergency fund." Unless the bank charges fees for a minimum balance, there is no reason not to open an account per goal. To hold yourself accountable even more, add "do not touch" to the name. The little things matter. - Crissi Cole, Penny Finance
13. Avoid Unnecessary Fees
Avoiding unnecessary fees allows people to meaningfully save. At my previous company, some of my coworkers were running into fees on bills due before payday, so I wrote checks for their earned wages. It’s why I started a company that provides earned wage access, allowing people to use their wages as they earn them, pay bills on time and avoid unexpected bank fees, interest and debt. - Ram Palaniappan, EarnIn
14. Stop Paying Interest
Start by eliminating or reducing any debt, credit card balances, or loans. Paying interest is the antithesis of saving. Set realistic targets for how you save for a rainy day. Overreaching your financial goals can quickly lead to disillusionment and to their swift abandonment. Hit some immediate targets by reducing liabilities and debt, and your saving goals become way more attainable. - Ksenia Yudina, UNest
15. Invest In Time And Effort Into Maintaining Financial Organization
Often the most financially resilient small businesses are well organized. By regularly reviewing your financial records, you can manage your cash flow, predict potential gaps in cash reserves and seek a loan before an emergency arises. By investing time and effort into maintaining financial organization, you create a strong foundation for your business's financial well-being and long-term success. - Luz Urrutia, Accion Opportunity Fund
16. Prioritize Loan Repayment First
Many don't realize that reducing debt is the best form of saving. Debt comes with risk, stress and high-interest rates, making it wise to prioritize loan repayment (particularly credit card balances and unsecured loans) over jumping on the latest investment or account offer. Maintaining a "piggy bank" account is also crucial for adequate short-term liquidity in case of unforeseen expenses. - Daniele Viappiani, GC1 Ventures
