Rule Two: Save For a Rainy Day

How do I save for rainy days?


Rule Two Video

Rule Two helps you prepare for less frequent bills and unplanned expenses. By saving for these expenses each month, you won’t be blindsided when something happens.
If you don’t spend the money you have budgeted during a month, the balance rolls forward in the category into the next month, building over time.

There are two types of rainy days:

  • Predictable Rain - You know when it will rain, because it was forecast. Car insurance, property taxes, and car registration are all predictable rain, because you know how much those bills are, and when they are due.
  • Unpredictable Rain -  You know they’re coming eventually, you just don’t know when or how bad they will be. Car repairs, medical bills, and home maintenance are all examples of unpredictable rainy days.

Let’s say each month, you budget $60 for Car Repairs. As you continue to do this each month, the balance in your Car Repair Category will grow.

The money stays in the Category where you assigned it until you need it.  When the car does break down, you will be ready. This means you won’t be scrambling or reaching for a credit card to solve the problem.

I just started and don’t have time to build up my rainy day funds before those bills come in. What should I do?

If your car insurance is due every six months, that’s great if you have six months to save for it. However, if you start YNAB in April and that next payment is due in May, it’s a challenge.

Use YNAB’s three step process to help you prioritize where to budget your dollars.  Eventually your rainy days will be easier to manage, but in the beginning it’s possible that they fall under “immediate needs” or “bills that are due soon”. It will get easier!

Where should I keep my rainy day funds?

We recommend keeping them in your main account (usually your checking account), though you can keep them anywhere. The budget doesn’t care where you physically store the money. If you're worried that you’ll spend it,  just make sure you’re making your spending decisions based on your Category balances. The bank balances will take care of themselves.

Learn about Rule Three