Why An “Extra” Fund is as Important as the “Emergency” Fund

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In the world of money management it is important to have an “emergency” fund.  This is pretty well Whether you are getting out of debt, saving, or investing, we all need a certain stockpile of cash to go to when something happens.  Maybe there is a trip to the ER, a leaky shower, or some sudden car work that needs to be done (all occurred to us this year).  Even though the expenses weren’t planned, we had enough “go to” or “emergency” cash to cover those sort of emergencies.

In living a frugal sort of life, it is smart to have an “extra” fund as well.  It doesn’t have to be as big as the emergency fund, nor should it be, but it should be a fund that you can contribute a little each month to.

Now what’s the purpose of the “extra” fund?

The extra fund would be the cash you pull from when you find something that is at an incredibly good deal, that isn’t budgeted for.  For example, my kids needed more storage for their rooms.  At Walmart last week, I saw that 3 drawer bins were on sale for 8 dollars each when they are regularly 12 to 15.  Each of my 3 kids needed one.  Although, they were all blue, I was able to spend 24 dollars on 3.  However, if I didn’t have the “extra” fund, my budget would be thrown off for the month.  Where that might be doable to borrow 24 dollars from the food budget, when you’re in the market for a couch or something that is more than you can float from one fund to the next.

Next time you are revamping your budget, consider the extra fund.  It allows you to budget for those things you are looking for.

 

 

 

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2 thoughts on “Why An “Extra” Fund is as Important as the “Emergency” Fund

  1. I’m not sure about the “extra fund” since I don’t know if buying something because it is a great deal is always the best thing. You can end up buying a lot of stuff that you don’t really need that clutters your home or gives someone else an even better deal at a yard sale ( which is where most of the things you buy are because they are a great deal and not because you really need them). I remember I used to go through the coupons and buy the stuff that on coupons that were about to expire, which resulted in buying a lot extra in the name of “savings.”

    I understand your point though, that there may be things you really do need that you buy before you absolutely need to because there is a special sale or something. There are also things that you will need to buy eventually, like replacing cars, roofs, appliances, etc… that you need to be saving for or you won’t have the money to replace them when needed. Even if you don’t take out car loans, it would be a good idea to make “car payments” into a mutual fund each month so that you’ll have the cash needed to put $10,000 towards the next family car when the existing one gives out. If you do this you’ll also have an account with some cash that could be tapped for extras when needed.

    I think the issue though is avoiding impulse buys “because it’s such a great deal.” Wal-mart is the expert at impulse buying. Unless I’m very disciplined, I always buy something I didn’t plan to buy when I go in because it’s sitting at the end of a shelf on sale and I suddenly think I need it. Maybe the thing to do would be to keep a list of things that you will need to buy on an approved “extras” list. If one of those things went on sale, you could buy it from the extras fund. That way, you would make the decision while you’re thinking rationally and not in a snap decision in the retail store aisle but still be able to pull the trigger quickly. Of course, it all depends on the personal discipline of the person making the purchase.

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    • Wow those are some great points! I like the idea of making payments to another fund for big things that might come up in life.

      I also like the idea of the “extras” list- so if your items aren’t fully scrutinized, they just might be an impulse and not a need. We don’t ever buy winter coats in the fall, we pre-buy ours in the spring for the next winter, when they are on clearance. However, we’ve done this for a while and know that in march, I need some extra money for kids coats. But by now we expect that expense for that time of the year. It is difficult to remember though, when you first start buying things off season or whatnot so I really like the list.

      Total off the topic comment- those checkout impulse aisles are horrible and mostly filled with things kids want! I hate checking out at the stores with my kids…”mom, look at this, oh I want that…” although, they’ve stopped now cause I just ask them “Where’s your money? Bring it and you can buy it.” Then all of a sudden its not worth it.

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