Refilling Murphy's Sinking Funds
Do you have a process for refilling sinking funds that are not constrained by a specific date, but by Murphy's Law?
I have to deplete most of my car repair category, and I'm wondering how should I refill. Slowly, or pause my debt snowball till it is filled? Any ideas?
These goals don't have a definite end date, as you say, but I might consider playing around with the Goals function using various end dates, seeing what monthly funding they require, and seeing "what feels" right in combo with the rest of your budget goals.
I know this is kind of a non-answer, but I think it's a matter of trying to find the right balance between your goals, specifically:
- How soon would you like to have this fund replenished? (e.g. Will it stress you out to have it unfunded next month? Based on how often your car has needed repairs in the past, do you think you'd be relatively safe to stretch this out this replenishment for 4 months? 6 months? Do you have another source of emergency funding that could be used in the unlucky event that you end up needing to use this fund before it's replenished, or not?)
- How much are you willing to slow down debt repayment in favor replenishing this fund? (e.g. How much "wiggle room" do you have in your budget? How much could you throw at this goal without significantly slowing down your debt snowball?)
I'm still struggling with finding these balance points too, but I think these are the major factors to weigh, and see where your individual comfort point lies. :)
Yes. My processes are not represented by the goals built into web YNAB, but that's okay. I managed them without color coded cues in YNAB 4, and I can manage them without color coded cues in web YNAB.
For car repairs, I budget $200 per month, subject to a cap of $2000. I expect $2000 to cover a typical Murphy's Law car repair, and $200 is greater than my average month for car repairs. The thinking is, I want this category to be able to handle a surprise, but I don't want it to grow to the sky. Hence, the cap. I also want it to recover quickly in case one Murphy event is followed by another more quickly than average. Hence, the normal budget that is greater than the average month. But having a limit on how fast I accumulate back to that desired $2000 lets me also fund other budget items (like your debt repayment) even though I am rebuilding the car repairs category.
It's a balancing act, but that's what budget decisions are all about. If Murphy stays away for a long time, I get extra money for nice-to-have categories. If Murphy shows up, I rebuild at a rate that still allows me to fund normal categories.
My real Murphy category is Unexpected Expenses. Most of the time, it just sits there at its funding target. It has no regular monthly budget amount assigned. After I have to use part of it, I refill it with money salvaged from categories that don't need all of their regular budget amount, such as underspent Groceries or a fully funded car repairs category that doesn't need $200 this month.
Patzer & Resistant Punch Roller Both of you answers gave me a lot to think about. Thanks for your advice. I still don't know exactly what I want to do, but I want to make a decision before July gets here. We do have our buffer to fall back on if something comes up before we can fill it completely. It would take us at least 2 months (closer to 3) to refill if we pause our snowball, and that's the most wiggle in our budget. We have been coming in under-budget on groceries the last couple of months, but I don't count on that being there till the last day of the month, but that money is an option too.
My husband mentioned that we will have to fill it slowly, and I want to do it quickly, so we may compromise and do something in the middle - a small lump-sum initially, then fill it back to our $2K cap slowly.
I do it similar to the way Patzer does it. I budget this way for a lot of items. I have a main category called "Monthly Annualized Expenses."
underneath that I have categories like; auto expenses, medical expenses, etc. I basically take what I think that amount is going to be on an annual basis and divide it by 12. I also cap some of the categories, which I will consider fully funded.
Every month, I budget that predetermined amount to that category. When I was just starting, sometimes I'd be 3 months in and had not fully funded the category. I would just "borrow" form another of these categories, and the balance them out accordingly, as I continued to budget throughout the year.
I've been doing it so long now, that I don't have to do this. I just allocate money to each category, and use it to pay for the expense when it comes up. If I use a capped category, I will allocate money to refill that category.
Hope this helps