If you follow me onInstagram or Facebook, then you already know that we had some hefty expenses over the past few months. We knew that we would need new tires soon and that we were living on borrowed time with our roof. We were just hoping to wait as long as possiblebefore biting the bullet and spending all thatmoney.
I don’t know about you, but those are not items that I enjoy spending money on. They are necessary though and unavoidable if you own a vehicle and a home. If you aren’t prepared for expenses like this, they can devastate your finances. You may even end up slapping them on your credit card or taking out a loan with exorbitant interest charges. In my mind, neither of those options is ideal.
I wrote a post last year about the benefits to saving up for incidental expenses. I still stand by that post and hope that you might give the concept a try, if you aren’t already. You can’t predict the future, but you can anticipate it.
In order to help us save for those incidental expenses, we set money aside each month into an account we have recently dubbed our “slush fund.”
What is a slush fund?
A slush fund account is where you set aside money for expenses that you anticipate having in the future. This is different than an emergency fund, since that money is designed to be used only for catastrophic events (ex. job loss, huge medical emergencies, etc.).
While a slush fund is not your emergency fund, it still acts as a buffer between you and Mr. Murphy.
Getting Started
With most things in life, getting started is usually the hardest part. If this concept is new to you, then it will likely mean a change in behavior. It can sometimes be hard to get on a new bandwagon if you are set in an old habit or way of doing things.
1. Choosing your categories
Find a time to sit down and brainstorm what expenses you might want to include in your slush fund {include your spouse if you are married}. Take a look at your monthly budget categories and think about your upcoming expenses. You might consider dividing them up this way:
- Routine expenses {ex. school tuition, insurance premiums}
- Projected expenses {ex. medical/dental co pays, larger home/car repairs}
- Special savings {ex. new tires, new computer, newer vehicle}
At this point, our slush fund includes: home repair,car repair,vacation savings,preschool tuition, andmedical expenses. {I’m going to add in Christmas when we budget for August, so that I can start getting into the habit of saving all year for it.}
Note: At the very minimum, I’d recommend car and home owners to set aside at least a little bit each month for larger car/home repairs. Even if your car and home are newer, putting a little aside each month will help you be ready when you do need to make repairs.
2. Decide where you will put the money
Once you have an idea of what you should be saving for, you’ll need to figure out the logistics of where you will put the money. Think about what type of account you’d like to use and what bank.
We opted to use a basic, no frills, checking account at the same bank where we have our joint checking account for bill paying. This allows me to transfer the money over each month with the click of a button. If you aretempted to “steal” from your slush fund, then you might consider using a different bank. Do what works for you.
3. How much to save
Now that you have your categories, you’ll need to decide how much to save each month. It should be fairly straight forward for your routine expenses. Since you know what the expense is, just divide the total bill by the number of months you have to save.
If you are putting money aside for projected expenses, just estimate and then divide it by the number of months you have to save. You can probably look at last year and have a pretty good idea of what you might need to save.
When saving for specific items, you might also need to estimate. Unless you have a quote in hand, you might be making a ballpark estimate.
Even if your budget seems stretched already, I think you’ll find that setting aside even small amounts for some of these foreseen expenses will actually help alleviate some of the stress of your monthly budget.
Do you have a slush fund?
P.S. For more frugal family inspiration delivered to your inbox, subscribe to my email listhere.
photo source
Related Posts
- 4 Benefits of Saving for Incidentals
- The Teacher’s Salary Series: Budgeting for Christmas
- The Teacher’s Salary Series: Tithing/Giving
- The Teacher’s Salary Series: Handling Emergencies
FAQs
A slush fund is a sum of money that is set aside as a reserve. In accounting, a slush fund is a general ledger account of commingled funds that does not have a designated purpose. In more sinister cases, a slush fund may be used as a so-called "black fund," which is unaccounted for and kept off the books.
How much money should you have in a slush fund? ›
Aim for a slush fund of around $1,000 to $1,500. After you have this locked down, you should then move on to putting as much money towards your credit card balances as possible (it's expensive to finance your life at 20%!)
Why do they call it slush funds? ›
Etymology. "Slush fund" was originally a nautical term for the cash that a ship's crew raised by selling fat (slush) scraped from cooking pots to tallow makers.
What does "slush fund" mean in slang? ›
A slush fund is a sum of money collected to pay for an illegal activity, especially in politics or business. He's accused of misusing $17.5 million from a secret government slush fund.
What is another term for slush fund? ›
slush fund (noun as in money for illegal activities) Strongest matches. graft hush money. Weak matches. boodle inducement.
How is a slush fund made? ›
Slush funds are usually created by diverting funds from legitimate sources or by creating fake accounts or shell companies. The money is then used to pay for illegal or unethical activities, such as bribes or kickbacks.
What is the 50 30 20 rule? ›
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
How much should a 30 year old have saved? ›
Fidelity suggests 1x your income
So the average 30-year-old should have $50,000 to $60,000 saved by Fidelity's standards. Assuming that your income stays at $50,000 over time, here are financial milestones by decade. These goals aren't set in stone. Other financial planners suggest slightly different targets.
What does it mean to pay yourself first? ›
Key Takeaways. "Pay yourself first" is a personal finance strategy of increased and consistent savings and investment while also promoting frugality. The goal is to make sure that enough income is first saved or invested before monthly expenses or discretionary purchases are made.
What does dirty slush mean? ›
partly melted snow that is usually dirty. In the city the clean white snow had turned to grey slush. There was dirty brown slush all over the roads and pavements.
SUBSCRIPTIONS: SLUSHY also allows content creators to charge for premium content, subscriptions, and chat. This provides content creators with multiple avenues to monetize their work and earn a sustainable income.
What is the difference between slush and slushie? ›
A slushy (also spelled slushie and less commonly slushee) is a type of beverage made of flavored ice and a drink, similar to granitas but with a more liquid composition. It is also commonly called a slush, slurpee, frozen beverage, or frozen drink.
What is banana slang money? ›
(informal) World War II Japanese invasion money.
What is a slush fund politics? ›
Definition and meaning of slush fund: A slush fund refers to a pool of money that is used for illicit or unethical purposes, particularly in the context of politics and governance.
What is blue dollar slang? ›
The “blue dollar” rate is the one received when buying and selling a physical dollar at a “cueva” — Spanish for “cave” — which is basically a clandestine exchange house. Some are readily advertised by people on the street yelling “cambio,” which means ”exchange” in Spanish.
How long does it take to get money from liquid funds? ›
For liquid funds, the redemption is usually done within 1-2 working days. For debt funds it is usually 2-3 working days and for equity funds it is usually 3-4 working days. The fund house will credit the money directly into your Bank account (which you had provided during your sign up on Freecharge Mutual Funds).
What are differences between a slush fund and a petty cash fund? ›
A slush fund typically contains a larger amount of money and is used for larger, unplanned expenses. On the other hand, a petty cash fund typically contains a smaller amount of money and is used for smaller, day-to-day expenses such as office supplies, postage, or minor repairs.
How do you keep money in liquid funds? ›
A liquid fund investor can keep his or her money for as long as necessary. Although there is a minor exit load for redemptions within seven days, liquid funds have flexible holding periods. This allows for simple entry and exit while delivering safe, market-linked returns for the duration of the investment.
How do money market funds pay out? ›
Money market funds invest in high quality, short-term debt securities and pay dividends that generally reflect short-term interest rates. Many investors use money market funds to store cash or as an alternative to investing in the stock market.
