Create a Comfortable Sofa Foundation to Give Your Budget Room for Day-to-Day Maneuvers
Your emergency fund should give you some peace of mind to help cover the costs during tough times. Most of the time, however, when you want to spend a little more, this is not an emergency. For those, give yourself a smaller “comfy sofa” foundation.
As personal finance site Mixed Up Money explains, a comfortable sofa fund is a small amount of money you can play with, but won’t ruin your budget. This is enough to make you feel comfortable. The site determines this by the following formula:
Average monthly expenses / 6
Add up all your expenses, including rent, utilities, etc., and divide that number by six. This will give you a small enough amount that you can easily store and, more importantly, easily refill if you need to. So, for example, if you spend $ 3,000 a month, your fundraiser for a comfortable sofa would be $ 500. If you’re looking to splurge a little on food or go to an event, you can throw away some of that money and top up when you can, without ruining your budget or investing in your emergency fund.
The Secret of Finding Your Magic Number | Mixed money via Rockstar Finance