So it’s the first month of a new year, and everyone is re-evaluating their budgets in January (if you aren’t-you should be!). If you’ve been keeping up with me, you’ll know that I have some amount of credit card debt that I revealed in my post: Dirty Financial Confessions. Ready for one more? I went over budget in all categories 8/12 months last year. Yikes! What is a girl to do?
It was only 30-40 dollars over each time, but if you multiply by that by 8, you can get the entire balance on one of my credit cards. So upsetting, but I know I’m not alone. I’ve talked to several other PF bloggers about this, and I’ve set on a mission to determine the culprit. After hours of time in my Learnvest “My Money Center” (which you should get if you don’t have it already, it’s fricking amaaaaazing.) I realized the budget overages were for expenses I knew were coming, but did not plan accurately for. Categories like beauty, Murray’s vet bills, my contacts that I order every three months, Car Maintenance, you get the idea.
Having an itemized budget was perfect for when I was poor and didn’t have to juggle so many responsibilities. Now I am a busy girl, and my expenses are always variable. Besides, it’s not like I can go without fixing my car or feeding my dog. I was severely dropping the ball by not having a plan for these items; that stops today.
How to Save for A Money Cushion
My spending was all over the place: $70 a month in one category, then I’d only spend $7 the next month to “make up the deficit” but I wasn’t really putting that money anywhere. I decided to try the money cushion method. This is different than an emergency fund, which everyone should have. A “money cushion” is an amount left over in your account to cover those little expenses that come every so often. I’m not talking about the money left over after you have paid bills and put money in savings. Your money cushion needs to have more structure to support you, see?
Having used Learnvest for over a year now I have a wealth a data, and cute, colorful graphs that show me how much I have spent on a given category over a period of time. They even conveniently give you an average dollar amount spent for the category, which helped me plan. I took this information and set aside the actual amount in my monthly budget. It doesn’t have to be big enough to cover the desired expense in one swoop-the important part is that you are saving for these items.
What if you don’t have historical data? Think about what you are going to need going forward. I know exactly how much it costs for my monthly prescriptions, my dog’s food, to get a haircut. I take these amounts and divide them by the number of months they regularly occur. For example:
It costs $33.00 for a bag of organic dog food for Murray. The bag usually lasts about two months.
So I take $33.00/2=$16.50
I set aside $16.50 in an envelope/jar/safe place (in cash and in hand, because that is the way it works best for me. Otherwise I will spend the money if it is in my checking account.)
I feel a little behind the curve because I just starting saving for my money cushion this month, coincidentally a month when most of the things I needed swung around again. I ended up taking a small amount of money out of my emergency fund to help balance out the difference and avoid putting the purchases on my credit card. I can now start fresh saving next month.
There are several ways to implement and use a money cushion, every blogger I know has a different method and they all work, just so long as you have some variable money is the important thing. It’s vital if you want to stay on track and avoid massive overages.
Do you have a money cushion?