Saving for a Rainy Day Saves Money

You may have heard about saving for a rainy day before. Perhaps your parents or grandparents gave you advice to put some money away into a savings account. If you haven't put some money away, you may have run into a financial emergency, and then needed to take out a payday loan. While payday loans are nice to have when you need them, the interest on these loans can add up. You can avoid paying the high interest rates on payday loans by putting together an emergency fund. You can consider this to be your own "payday loan shop" if you'd like.

Set Up a Budget

The first step to setting up an emergency fund is to set up a budget. You may have put together a budget before, especially in short term situations when your money was tight, or if you had a financial emergency, took out a payday loan, and wanted to make sure that you could pay it back on time. A simple way to create a budget is to get out a piece of paper, list all of your expenses on one side, and all of your income on the other side. If you have more expenses than income, you have to find out a way to balance your budget. If you can't increase your income, you will have to find a way to cut things out of your budget. Make sure that you are including everything that you spend money, including your bills, food, and entertainment.

Pay Yourself First

If you really want to give yourself an emergency fund that will prevent you from having to take out payday loans, you will have to save some money. If you're living paycheck to paycheck already, it may be difficult to "pay yourself first," or take money and put it into savings before you spend any other money. However, as you probably have found out when you put your budget together, it always seems like there are more things to spend money on than you have income for. If you can squeeze a little more money out of your budget to start saving money, that's great. If you're just getting by, you may not have anything that you can save. If you can't spare money out of your paycheck, put any extra money that you get into savings. You may receive tax returns, money from babysitting, or rebates that you can save.

Replenish Your Savings

When a financial emergency occurs and you don't have money set aside, you might take out a payday loan. These payday loans have to be paid back, with interest. Somehow, you find a way to pay back that payday loan, right? Once you have an emergency fund built up, you want to make sure that you pay it back, just like you would a payday loan. Otherwise, you might spend all of your savings, have another emergency, and need to take out another payday loan.