Before the beginning of each month, I prepare a budget using the Dave Ramsey’s EveryDollar app. Doing so is now a habit that I’m very proud to have. Ramsey points to the budget as the foundational element of financial control. He’s right. Having and using a budget is powerful. Very powerful.
I do a “zero-based budget” which means that I make sure that it balances completely. Every anticipated dollar of income is allocated toward an appropriate spending category. On paper, there are no extra, hanging funds that are not intended to be used for a particular purpose. There’s a budget category for everything from my pocket change to the additional funds that I’ll be contributing to my debt snowball that month.
Though my budget is zero-based, not every allocated dollar gets spent during the course of the month. I often underspend in discretionary categories like auto gas, drycleaning and pocket change. What I’ve been doing with these allocated, but unspent funds is . . . nothing. They’ve remained in my personal checking account. When I prepare the budget for the following month, I make it as if there isn’t any residual money available from the previous month or months.
The result is that about $1,500 has now accumulated in the account. Of course, I could take the excess for every month and apply it to the debt that I’m attacking in my debt snowball (right now it’s my 2016 tax bill) and start off every month fresh with no money in the account. But . . . I don’t want to do that.
Dave Ramsey would probably say that I should be using the excess funds every month toward my debt snowball. I’ll admit that having the money functions almost like another baby emergency fund. The point of having just one $1,000 baby emergency fund (under the Dave Ramsey Total Money Makeover Plan) is to make you feel a bit uneasy – so uneasy that you hustle as much as possible in order to pay off the debt as soon as possible. For someone who isn’t facing over $300,000 of debt (and the length of time it may take to pay it off) and who doesn’t work for themselves (like I do) that’s not as scary a proposition. For my self-employed, extreme debt-having self, the idea of some extra money in the account makes me feel good.
For my self-employed, extreme debt-having self, the idea of some extra money in the account makes me feel good.
~ Single Girl
Having come from a place of being so out of control with my money, I like having money in my account. I lllooooovvveeee no longer feeling out of control. Even though it’s “only” $1,500, having it and seeing it sends a message to my subconscious self that abundance is a part of my life. The presence of the money represents my ability to deliberately set intentions for my use of funds and to operate in accordance with a system. The $1,500 is not enough to make me feel comfortable by any means; it just looks and feels better than just the $1,000. Look, if it’s okay for someone with only $10,000 of debt to have a $1,000 baby emergency fund, it seems reasonable for someone with $300,000 of debt to have just a smidgen more than the $1,000 hanging around.
My plan is to use the accumulated funds to make large payments on my debt snowball, but I don’t intend to totally deplete the funds in doing so. When the amount gets to, say, $2,000, I’ll take $1,000 or $1,500 of it and pay it toward my debt snowball. Then I’ll let it replenish back to $2,000 and make another lump sum payment. I may change my mind later about how to handle these funds, but, for now, I want to do it this way.
What do you do with your budgeted, but unspent funds each month?
Do you only keep $1,000 in a baby emergency fund?
If not, what amount do you prefer to keep in your savings account?