Your emergency fund is supposed to give you some peace of mind to cover expenses when times are tough. However, most times you wish you could spend a little extra aren’t emergencies. For those, give yourself a smaller “comfy couch” fund.
Photo by Craige Moore.
As personal finance site Mixed Up Money explains, a comfy couch fund is a small amount of money that you can play around with that won’t destroy your budget. It’s just enough to make you feel comfortable. The site defines it using this formula:
Average Monthly Spending / 6
Add up all your expenses — including rent, utilities and so on — and divide that number by six. That will give you a small enough number that you can easily save and, more importantly, easily replenish if you need to. So, for example, if you spend $3000 every month, your comfy couch fund would be $500. If you want to splurge a little on food or go out to an event, you can drop some of that money and replenish it when you can without destroying your budget or dipping into your emergency fund.
The Secret to Finding Your Magic Number [Mixed Up Money via Rockstar Finance]
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