15 ways to ruin your financial future: No rainy day fund

I have seen the future, and it is this: No rainy day fund, and someday, I will be all washed up. I saw it recently after Hurricane Ike moved through the Gulf of Mexico, crashed into Texas and eventually made its way up to Ohio, yes, Ohio, and took out my electric power for three days. If I had had a quick stash of emergency cash to raid, I might have bought a generator, to keep my computer going, so I could write, which is, after all, how I make my income; or maybe I would have felt comfortable paying for a hotel for a couple days and nights, allowing my wife and kids to have the creature comforts of a TV and swimming pool, while I diligently went to work.

But since I didn't, we lived an Amish-lite lifestyle while not earning an income for several days. I also saw my grim no rainy day fund future about two days before Hurricane Ike as well. My car died. It's still rotting away in a parking lot at Car-X while I try to figure out what to do. What I am sure I won't be doing is paying for repairs (over $3,000 to replace the engine and have the mechanics install it) or paying for a down payment to get a new car. For now, we'll be a one-car family instead of a two.

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And, of course, I've seen the results of not having a rainy day funds many times -- and I'm not talking about an IRA or some other retirement fund, which if you don't have one is also a great way to ruin your future. My non-rainy day fund tales are seemingly boring stories, involving appliances expiring and not being able to replace them without turning to a credit card. But replace enough dishwashers, transmissions and tires that unexpectedly get a nail in with them, by turning to your credit card, and eventually, you get some really dramatic, frightening results (see: current headlines). In other words, if you don't have a rainy day fund, you're putting your retirement funds at risk, because if the right financial disaster comes along, you're going to have to get money from somewhere...

Of course, creating a rainy day fund isn't as easy as it sounds. For starters, you have to dedicate yourself to putting money away, which isn't easy if you're not used to doing that or used to stretching your paychecks in creative enough ways to get through the week. Then, of course, if you truly need to use the rainy day fund, you have to be diligent enough to replenish it.

So I'm not saying I have all of the answers. But I have re-started another rainy day fund, now that my electric is back on and life is back to normal, and I'm going to try to make it a monthly thing. How much am I going to try to save? I really don't know. Some experts say three months' worth of expenses is the right amount, and others will tell you as low as $1,000 is acceptable. I don't think there ever can be a completely accurate answer since all emergencies aren't created equal. Losing your job is a major emergency, but not being able to meet a house payment can light a fuse that eventually detonates your bank account. But whether you're putting away $30 or $300 a month, I do know that nothing is better than something. If you're doing it right, your rainy day fund should provide enough to buy an umbrella.

Geoff Williams is a journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).
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