Skip to main content

3 Freedom Fund Categories

A Freedom Fund is a great supplement to the Emergency Fund. It stands to reason that there are categories of upcoming expenses that are likely to come up within a year or two and you can easily save for these expenses, a little each month, above and beyond your normal savings.

This past weekend, the cat got sick and required an ER visit which totalled over 300 dollars. This was an unexpected expense -- the reality is that most people can't easily absorb it. My budget is certainly tighter now this month, but it is not undoable in any way. Fortunately, the experience has showed me it is a good idea to review the expenses to see what, if any need to be revised.

The first that you might be overlooking (if you're like me) is pet expenses. These can run into thousands of dollars, so it is important to budget for this so that a pet-emergency doesn't totally ruin your finances.

The second is an inflation buffer. This seems a little strange, but the reality is that our normal adjustments don't work and are not always sufficient. Normally, I try to adjust my budget once or twice yearly at the end of the year and/or during raises. But sometimes, there is no additional money and prices continue to climb. Simply save some money that you can use in the event that inflation spikes unexpectedly on daily items like heat/food/transportation etc. This is not emergency money since rising prices is not an emergency.

The third is a car-replacement fund. Obviously, the goal is always to pay off debts, including car loans. Once the car is paid off, you'll want to save money in a fund to handle maintenance. Unfortunately, the car will not last forever and while it is tempting to simply spend the 'car payment' money, but this should be (at least in part) set aside to help defray the cost of replacing the car in years to come.

These are three somewhat strange, non-emergency categories that I have in my freedom fund now. What categories are there? What has been your experience with your own freedom fund?

Comments

Popular posts from this blog

Do Better With Your Time

Recently, I've been extremely busy with some work commitments. The interesting thing for me is that this increased work activity has really helped crystallize some of my feelings with regard to time. And these ideas are a critical part about my view on personal finance. I'm curious to know if others feel similarly. Time is money. That is, Time, in some way, contains energy. Money, is also energy. In the act of working, I am able to compound and increase the amount of money that I have. I am exchanging my time and effort and thought which are components of my work, for the productivity that I produce. And this production gets me money from my employer. However, the first dollars that I make each day, week, or month are the most valuable. Then the ones that I make at the end are the most valuable. (Forget about taxes for a minute.) The reason is, the first ones help me have a place to live and food to eat. And the last ones are the ones that I can use to really improve my life lo...

Awkward Family Money Situations

I was about to write this as a comment, but its quite long and brings up a ton of issues so here goes. First, check out  <a href=" http://hereverycentcounts.blogspot.com/2007/06/money-and-etiquette-why-are-important.html ">this story at here every cent counts</a>. Now on to my response. I am just mortified by this story. I cannot even imagine that people with kids would expect someone in college to pay for their own dinner. I'm assuming that this is an aunt/uncle/great aunt/great uncle situation and that you are a young college student in late teens, early twenties with no full time job. All of my answers below are based on those assumptions. If that is the case, they should *splurge* the 20 bucks for dinner. They are an adult here and as much as I believe that you should be independent, while you are in college and struggling for money, you should be treated on an occasion like this. Big Question: How do your mom and/or dad and/or other immediate family ...

On Buying a Lifestyle...with a Fixed-Rate Mortgage

Despite all of the back and forth about sub-prime mortgages and the housing bubble, I am feeling just fine. The reason is that when purchasing, I followed some old advice: Don't expect to flip. In general, I've been told by many people that you shouldn't buy a home unless you plan to hold on to it for 7 years or longer. If the market does well and you decide to sell, fine. But if you want to be sure not to lose money, don't buy something that you only want for a year or two. I've been in my current location for more than 3 years. I like it. And I have no intention of leaving in the short or medium term. It seems to me, that real estate, like any asset class, has its ups and downs. But as a practical point, I don't look at my home as an asset per se. Rather, I consider it to be a fixed expense that I need to survive, much like food and water. Therefore, as long as the payment is reasonable and it functions to keep me warm and sheltered and comfortable, that is a...