Keeping a cash cushion

I was wondering if there is a "best practice" way to keep a cash cushion amount of money in YNAB.  For my day to day life, in my checking I like to think of something like $2000 as my $0.   This way if the electric bill is larger than normal, its auto drafted, I don't have any issues.  Also, if anything comes up I have a little extra.   Once all the bills are paid if I get close to $2000 I know I am getting low.

I don't really consider this "Savings" like the money doesn't have a real purpose rather than being a buffer.    Is the correct way to handle this just to make an account called cash cushion, put $2000 into once, and just let it rollover each month?

I also wonder how this ties into the goal of living off of last months money...Should I be striving for my buffer to be the average of a normal months entire budget?


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    • nolesrule
    • Been waiting 5 years for the Stealing From the Future fix...
    • nolesrule
    • 3 yrs ago
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    Just consider it part of your emergency fund, put it in a category and leave it there. The emergency fund is intended to be your financial cushion.

    Money you put in a category stays in that category until you spend it or move it to another category.

    As for the Living off last month's money, what that means is being able to fund all your categories using only money received in the previous month. Depending on when you get paid, the amount you need to build up for that to happen will vary. While this budgeting practice does create a bit of a financial cushion, it's more of a time machine and administrative convenience so you don't have to budget multiple times per month and you can start each new month with all the money you are going to spend in-hand.

  • I'm assuming your question is more to do with how much to keep in your transactional account and whether that minimum balance is in it's own category in the budget, and not how to figure out how much to budget monthly for wildly fluctuating utilities.

    From the account perspective, I am very much like you.  I like to make absolutely certain that my account never goes negative.  I start every month with a transfer to/from savings so that the balance in my chequing account is equal to the following:  my average monthly spend + any big irregular scheduled transactions + $1,000.

    My $1,000 minimum is not in any specific category; it's just part of my cash-flow management. I could just as easily decide to move all my savings into my chequing account, or make my minimum $250 instead of $1,000. Transferring funds between accounts does not affect the purpose of those dollars in my budget.

  • When I first started, I had a category for the required account minimum in my checking account. Eventually I decided that it was useless and that the minimum actually lived in my loss of income fund because if my checking account ever got so low that  it was below the mandatory minimum it would be because of something dire like catastrophic loss of income. Other than my mortgage and condo fee, I don't really "spend" from my checking account(s). I pay credit card bills and occasionally withdraw cash, both of which are transfers to other on budget accounts. So as long as there are 2 mortgage/condo fee payments plus 15%(ish) in my checking account, I have no need to worry. And I can tell that just by glancing at the balance.

    If there were some extraordinary expense happening some month, it would 99.9% be charged to a credit card which gives me until the end of the billing cycle plus 20-30 days before a payment is actually due which is plenty of time to move funds around by a) reallocating from Category A to B as needed and b) making sure that there is enough in the right checking account to pay the credit card bill. Of course, I am saying this from the position of having enough in categories like Loss of Income and Medical that it would be highly unlikely for any unusual expense to send me in to debt so YMMV.

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