You’ve made it to the third week of the GB 30 budget challenge! That means you’re halfway through this challenge. Great job making headway on your cushion goals and getting this far.
Today, we’ll be discussing ways to protect the cushion you’ve spent so much time and effort building.
It’s no secret that creating a cushion to break the paycheck to paycheck cycle is hard work. You’ve probably had to make lots of sacrifices and do hours upon hours of (extra!) work to get this far. (Remember, this is only temporary and you’ll be getting back to regular life soon!)
Unsurprisingly, money is much easier to spend than it is to make. And while it may be tempting to use these new cushion savings to have some fun or to reward yourself for building them up in the first place, it’s also important to remember that they’re there to help you avoid taking on debt and to keep your checking account balance comfortably above zero all the time. They’re also there to give you peace of mind and relieve stress, and that won’t be possible if you sit on it until it’s completely flat.
We’ll get into when it’s appropriate to sink into your cushion in the next assignment, but for now it’s helpful to think of your cushion not as an emergency fund (i.e. it shouldn’t be the pot you pull from when your car breaks down). It’s ultimately meant to help you smooth out the normal ups and downs of monthly spending as you wait for your income to come in.
In order to keep your cushion, you have to be spending less than you earn and saving for unexpected expenses to further pad your budget against instability. That’s what we’ll be talking about today.
How to keep your cushion
Having a cushion long-term is a great way to build financial security. Some refer to it as a “budget hack,” which makes it feel like you’re cheating the system somehow. But in reality, building a cushion should be thought of less as a hack and more as a must-have. As much as you can help it, your goal should be to keep it for as long as possible. Here are some ways to do that:
Spend less than you earn
Those of you who chose to cut back on spending to help boost savings are already a little ahead of the curve!
In the last assignment, you learned how to create a budget, and we recommended making one that was equal to your regular income. That might work right now, since you’re boosting savings in other ways, giving you extra cash that you can use to build your cushion.
But in general, spending exactly what you earn won’t help you get ahead, especially if your budget doesn’t include other kinds of savings categories (think ‘car maintenance’ or ‘home repairs’). By not spending less than you earn, you might find yourself dipping into your cushion too often or too early, which risks bringing you back into the paycheck to paycheck cycle.
One way you can avoid that and keep your cushion is by consistently spending less than you earn.
By spending less on your regular expenses than the amount you earn, you’ll be less likely to deplete your cushion slowly over time. So even if your gas bill happens to be a little higher than expected, your cushion will still be intact since you can cover that extra from other parts of your budget, rather than from your cushion.
Spending less than your income also means you’ll have leftover cash to help you save for the “unexpected.” Which brings us to our next point.
Save for the “unexpected”
“For far too long we were living paycheck to paycheck. Never in too much debt, but never a safety net or a house deposit. I now have funds aside for all the regular things (no surprises anymore) and we know where our money goes.” – anonymous
There are very few things in life you’ll need to pay for that will be totally out of the blue. You may not be able to predict that your car’s engine is going to fail, but if it’s ten years old, you can reasonably expect that it will need some major maintenance in the near future. Similarly, you might not be able to predict that your cousin would be getting married this June, but you can probably expect that you’ll need or want to travel once a year or more. These seemingly “unexpected” things that might feel out of our budget can actually be planned for! And that’s good news.
Because if we can plan for those things, we’re also able to save for those things.
BUT… we’re only able to save for these kinds of expenses when we can dedicate some of our income to them.
So once you have your cushion, you may need to update your budget further, tweaking things here and there so that your regular expenses are less than your income to make room for other kinds of savings. If you’re not sure which kinds of expenses you might want to plan for, here are 16 things you can save for to help get you going.
When you’re actively saving for these kinds of expenses, you’ll have money set aside for those car or home repairs, which means you won’t have to use your cushion.
This 30-day budget challenge is about helping you break the paycheck to paycheck cycle by building a cushion. And, if working to build a cushion is what you can manage right now or in the near future, that’s understandable, and we don’t want to minimize the work that it’s taken you to get this far.
But it would be a disservice to you if we didn’t emphasize how spending less than you earn and saving for unexpected expenses will aid you on your journey of keeping that cushion for the rest of your life. So be sure to give yourself some time to think about how you can incorporate these strategies into your budget — when you have space.
Leave a comment and let us know:
- How building your cushion is going. Are you on track with your 30-day goal?
- What kind of “unexpected” expenses have you had to deal with lately? How will you start saving for that expense in the future?