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 does a slush fund work? ›
Slush funds are unofficial accounts containing money for use in ways that shouldn't be condoned by upper management – for example, purchasing of company party supplies, plush office furniture, excessive business travel and entertainment expenses, or even legitimate needs that can't be met through regular channels.
Is a slush fund illegal? ›
In business slush funds can be used to influence decisions or buy information that isn't freely available. Using funds in this way can be described as a form of corporate bribery and corruption. Misusing funds without the proper permissions is illegal.
How much is in a slush fund? ›
A slush fund, or a budget reserve for unexpected expenses, should ideally constitute 10% of your budget according to financial experts. This recommendation aligns with Paula Pant's advice on savings and the 20/50/30 budgeting rule, emphasizing the importance of having a financial buffer.
Why is it called a slush fund? ›
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. This cash was kept separate from the ship's accounts and used to make small purchases for the crew.
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%!)
What is the slush fund scheme? ›
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.
What are differences between a slush fund and a petty cash fund? ›
Slush Fund = Money Put Aside for When You REALLY Need It
And it's not “petty cash” because it's not for incidentals like catering an unexpected client lunch in your boardroom.
How much is in a rainy day fund? ›
How much money to put in your rainy day fund
| Rainy day fund | Emergency fund |
|---|
| Recommended savings | $500-$2,000 | 3-6 months' living expenses |
| What it covers | Small, unexpected expenses | Large, unexpected expenses or major life changes |
| Where to keep it | High-yield savings account | High-yield savings account |
Oct 18, 2023
Potential Confiscation of Large Amounts of Cash
Despite there being no law against possessing large sums of cash, it is inadvisable to keep excess cash assets on your person. According to the American Civil Liberties Union (ACLU), a collection of laws known as "Civil Asset Forfeiture" allow: "…
an amount of money that is kept for dishonest or illegal activities in politics or business: He used his party's slush fund to buy votes in the election. SMART Vocabulary: related words and phrases.
How much is in a stack of cash? ›
According to Federal Reserve Bank Services, a bundle is comprised of 10 currency straps of 100 bills each for all bills greater than $1. A currency strap of $100 bills is worth $10,000 and a 10-strap bundle totals $100,000. 100 notes is the worldwide standard count for one strap – regardless of denomination.
What is a slush budget? ›
A slush fund refers to a pool of money set aside for discretionary spending, often without clear accountability or oversight. It's typically used for various purposes, such as illicit activities, or personal expenses, and may lack transparency in its usage.
How are slush funds created? ›
Slush funds are created by diverting funds from legitimate sources, such as profits from a business, or by using illegal means, such as embezzlement or fraud.
Why is it called hard cash? ›
The hard in hard cash is easy enough to figure. Coins and other metal currencies were firm, whereas bank notes or letters of credit were flimsy paper.
What is the allusion of slush fund? ›
It did not take long, however, for slush fund to take on a new meaning, one that has very little, if anything, to do with the sale of leftover cooking grease. In the late 1860s the word began to see use in the sense “a fund for bribing public officials or carrying on corruptive propaganda.”
How long does it take to get money from liquid funds? ›
Liquid funds are designed to allow redemption of units within 24 hours, providing quick access to your funds.
Why padding or slush funds are not an acceptable estimating practice? ›
- Undermines the professional responsibility of a PM to develop a realistic schedule and budget. - It is a poor sign of Project Management. - Can be detrimental to the Project. - It will most probably give you unrealistic schedule and budget and might end up losing the Project.
