Lush Living Made Simple

You Need a Money Cushion - The Lean Times

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Apr 1, 2010 Debt , , , 0 Comments

The regular readers of this blog know I am hyper actively working on reducing my debt and in doing that I some times get over zealous.  Whenever I have a bit of money that has not been allocated to a specific expenditure, I throw it at one of my debts.  The problem is, I have been caught out on a couple of occasions by not having enough in my bank account to cover an unexpected bill.

I am trying to do Dave Ramsey’s Baby Steps, in which the first step is to have a $1,000 emergency fund or in my case in the UK, I am supposed to have £1,000 but that would be kept in my savings account so it is not accessible for everyday spending or as a buffer to going overdrawn.

After being caught out more than once I now know I need a cash cushion of about £50 to keep in my checking account.  It is never the big bills that catch me out, it is the small ones that I tend to forget about like the the direct debit  for the TV License or the cable.

There is such a thing as cutting it too close.  I love watching my debts get smaller, it gives me a sense of accomplishment. But it is several steps  backward to go overdrawn, to have to pay stupid tax for not being as careful as I should and getting a bad mark on my credit rating.   So now I have an untouchable £50 in my account and onwards with eradicating debt.  Do you have a money cushion?

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