Prevent Financial Falls With A Cash Cushion

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emergency fundKeeping A Cash Cushion
Mike Bowman  

Let's face it. You can be the absolute best budgeter in the world, but Life doesn't care. Life has a way of throwing oddball challenges at you that will wreck havoc on your budget. So what do you do to protect your savings and budget? Try the cash cushion approach.

Some people call it an emergency fund or a cash reserve, but I like "Cash Cushion"! Life's emergencies are what used to throw my budget way off. Something was always happening and I had to dig into the grocery money or car payment money in order to address the issue. My daughter ripped her winter coat, the washer stopped working, or I needed new tires to pass the state inspection. How was I supposed to know my kid would need TWO winter coats that season?? Having a cushion will help you deal with non-budget, life emergencies and keep you on track.

Additionally, I have an extra layer of cushion, just to keep myself honest. That means instead of trusting myself with the extra cushion of cash, I applied it to paying one month ahead on my mortgage (for me that's $800). That way I don't have cash laying around screaming "It's ok. Spend me!", but I know I can skip a mortgage payment, because I am ahead one month, and can use that money for the emergency.

So what about you? What's your favorite way to plan for / deal with the unknown?

About the author Mike Bowman
Mike writes for TheQuarterRoll.com, a website that makes small business ownership and personal finance fun and entertaining through the stories of real people. Be sure to follow Mike on Twitter @TheQuarterRoll

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The Quarter Roll is published to provide personal insights and opinions on everyday ways of saving and managing money, budgeting, and reducing debt. The Quarter Roll does not give professional accounting, legal, or investing counsel. The ideas, examples, and advice presented on this site are solely the opinion of the authors based on his or her personal experiences. All photos courtesy of The Quarter Roll, iStockphoto, or Dreamstime. All rights reserved.