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Saving for a Rainy Day

Why does it matter, and how can I get started?


We have all likely heard our parents and grandparents tell us to “save for a rainy day.” But what exactly does that mean? Build up a “cushion” for emergencies? Retire early? Or plan ahead for the next recession?

In terms of national economic downturns, the Great Recession of 2008 negatively impacted savings and investments for many people who had to rebuild a lifetime of savings. 

While we don’t know when the next recession will come, we do know that it is possible at any time, so it’s a good idea to always be prepared ahead of time. Being taken by surprise could mean you’ll need to make quick—and likely unpleasant—changes to your lifestyle.

How Inflation Affects Your Lifestyle

After a long period when interest rates were at historic lows, it makes sense that as the price of goods and services continues to rise, so will the cost of borrowing money to pay for many of these items.

Lately, inflation has been at the forefront of the news, so naturally people are worried about a possible recession around the corner. What happens during a recession? We would likely experience job losses and unemployment, a drop in real-estate values, and declining investment values.

These inflationary trends can have a negative impact on your personal finances and your purchasing power—meaning that it can take more money to buy the same amount of goods and services that you need and want.

With that in mind, it would be a good idea to plan for the need to live within your means during periods of rising prices. The good news is there are ideas that can help. 

How You Can Plan

There are several ways that you can plan for continued rising prices, as well as for reduced work hours or even a complete job loss, should a recession occur. Some of the key strategies include cutting unnecessary expenses, saving one partner’s income while living on the other’s, diversifying your income sources, expanding your skills, and diversifying your investments.

Cutting Unnecessary Expenses

One of the best financial strategies that you can implement in preparation for a recession (or even if you simply want to save more money every month) is to cut unnecessary expenses. Putting together a spending plan and a list of your essential and non-essential costs can make a world of difference in terms of keeping tabs on where your money is going, as well as showing you where you may be able to trim some expenses.

For instance, do you really need the deluxe cable TV package, or could you cut back on some of those costly movie channels?

Other strategies for cutting unnecessary expenses include making (and sticking to) shopping lists, bringing lunch to work rather than going out, turning off lights when you leave a room so as not to waste electricity (because even the seemingly “little things” all add up), and inquiring about spousal or domestic-partner discounts on insurance. (Many insurers are now allowing same-sex couples to pay less on coverage if both individuals purchase a policy.)  

The money that you don’t spend can then be used to beef up your savings, which can also help you to prepare for a rainy day and corresponding inflation. This is particularly true if you run into unexpected costs like a roof leak or fender-bender. Rather than putting these repairs on a high-interest credit card, you can instead pull the money from your emergency fund.

Saving One Partner’s Income While Living on the Other’s

If you are married or live with your partner and you both work, you could make a goal of paying your living expenses with one of your incomes and putting the other’s income into your savings or investments.

For those who are in a solid relationship where each partner maintains a separate household, it may make sense to take the next step and move in together. This alone could save you a significant amount of money every month, as you can eliminate many duplicate expenses like rent or mortgage and utilities.

Depending on the situation, you may even be able to keep both homes and rent one of them out. This can create a passive income source, as well as some additional income-tax deductions on the rental property.

Even if you aren’t able to save all of one spouse or partner’s income, you can start small with whatever amount you can swing and then work toward a larger amount down the road. 

Diversifying Your Income Sources

Diversifying your income sources can be another viable method of preparing for a slowdown in the economy. In this case, you may be able to take a hobby—such as graphic design or fiction writing—and turn it into an income-producing business.

Today, there are myriad ways to generate income both online and off—oftentimes on your schedule—such as driving for Uber. You could also get creative with income generators such as renting out unused space in your garage to someone who needs extra storage.

Another reason it is important to put some additional income-generating strategies in place is in case you or your spouse or partner were to pass away unexpectedly and the survivor’s household income is significantly reduced. This is particularly true if you are not married and the survivor would not automatically receive the deceased’s retirement savings, employer-sponsored life insurance proceeds, Social Security income, and/or pension continuation.  

Expanding Your Skills

Another way to help fight inflation is to expand your skills so that if you lose your current job, you’ll be able to move to another industry or area where what you bring to the table is still needed by others.

When deciding what other skills you want to learn, it may be wise to consider those that are more recession-proof, such as healthcare, education, social work, veterinary medicine, accounting, law enforcement, firefighting, or auto mechanics. That way, your skills are more likely to be in demand so you can keep generating incoming cash flow.

Diversifying Your Investments

Diversifying your investments can provide you with a couple of significant advantages. For instance, diversification is a risk-management strategy that promotes having a variety of financial vehicles in your portfolio so that the risk of loss is reduced and you can ideally increase the opportunity for higher long-term returns.

Keeping Your Financial Life on Track

A financial-planning professional can help you put together a plan tailored to your specific goals that can weather our long-term economic cycles. It is also a good idea to review those plans on a regular basis. To get started, or to get a second opinion on a plan that you already have in place, it can be beneficial to work with a financial planner who is well-versed in the financial issues of the LGBTQ community. 

This article appears in the May 2022 edition of OutSmart magazine.

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.
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