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What are rainy days?

You’re in the midst of paying off your debt and tackling it with a speed that is even impressing you. Your debt snowball is getting knocked out one after the next and you have the momentum to throw even more at it. But then, BOOM. Storm clouds are on the horizon. And things look like they are going to get nasty.

Dave Ramsey talks and uses the dark clouds of a storm as a metaphor for unsure times ahead in your future, and the uncertainty that they could potentially bring.

When we talk about storm clouds that could impact your overall financial well-being, we usually are referring to big, life-changing events. These events include the loss of your, or your spouse’s job(s), a move (usually not lateral in change), the birth of a child, etc.

So how do you plan for these life events, if you are still in the early baby steps?

You prepare for the rainy days ahead.

This means you start putting more towards your savings, typically what you would put towards your debt snowball, but now postponing these additional payoffs. You can do this by continuing to add to your already established Emergency Fund of $1,000 (Baby Step 1), or create another savings account at your bank and title it “Rainy Day Fund” or something similar so you know what exactly this fund should be used towards.

Normally we would not suggest delaying paying off your debt, but if the “storm clouds” look that daunting and heading your way, the best way to protect yourself (and your family) from going into further debt, is to build a safety net.

How much should the safety net be?

This is a number that is going to be specific to each individual’s scenario. However, we do not suggest jumping to Baby Step #3 – increasing your emergency fund from $1,000 to 3-6 months of funds.

Dave Ramsey’s and our suggestion for this is similar. Continue paying your minimum payments towards your debt items, however, instead of taking your additional income and applying it to your debt snowball, you take those dollars and put them in your “rainy day” account. Just squirrel away that money until the “storm clouds”, i.e., troubling situation, have passed.

How to recognize the “storm clouds”

Again, these “clouds” may look different for each person’s situation. A good rule of thumb is going with the “writing is on the wall” theory.

If there is a move coming your way, basically you are in the process of selling/under contract.

If you are expecting a child, start transitioning how you save once this is confirmed by your doctor. FYI - Kids can cost a lot, and always seem to have sticky hands.

If you think there may be a chance of a job loss because you’ve had multiple meetings with your boss, your company has been bought out, downsizing, etc., you will want to start saving in case there is some time you will be without consistent income.

The storm clouds have passed

This means one of two things have happened: 1) the storm really wasn’t an issue and you are glad you had this rainy-day fund to help supplement income as needed. Or 2) it was all precautionary, and thankfully your possible issue or situation did not happen, and there was no need to dip into this extra reserve.

So now what do you do with it? Simple, throw all of it at your debt and tackle your debt snowball!

As we said, you’ve been keeping up with your minimum payments, so now take everything that you have been safe harboring if needed, and throw a chunk at it! Who knows, you could even knock a few debt items out with it all!

Regardless of what happens with the storm, it is a win-win. Because you will be taken care of since you prepared ahead of time if there was a storm, and if the clouds pass without any damage, you now have that to start paying things off again.

If you are currently trying to pay off debt, or “see a storm on the horizon” reach out to your Financial Advisor to have them connect you with our Financial Coach!


September 16, 2022

Lindsey Curry

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