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Use a Buffer account instead of Emergency Savings

emergency saving

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Use a Buffer account instead of Emergency Savings

Have you ever been to the grocery store and your card gets declined? I have! It sucks! lol… I had to say “I'm sorry I can't pay for this, what do I do?”. Then I wheel my cart over to the customer service, hoping I didn’t see anyone I knew, and drive home. I got a credit card or my wife's debit card and then came back to pay for the groceries. This is so embarrassing. You are embarrassed and also so angry with yourself that you let yourself get into this situation. Look, this is going to happen even if you have money! Your card can stop working. There could be a problem with the bank. Maybe there was an automatic withdrawal you totally forgot about.Trust me, I understand. It's a horrible experience.

What is a Buffer Account vs. Emergency Account?

A Buffer account is a term I made up for this trick. A Buffer Account is a side savings account with $500 - $1500 specifically to absorb unexpected expenses, that might not happen EVERY month. You don’t want to put this expense on a credit card! And you want to be ready for these surprises.

What about Emergency Savings?

Don’t keep poking your Emergency account! You probably heard about having an Emergency Account. It's a super important thing to have in your life. It is 6 months worth of expenses in cash to cover an emergency. Life happens! There is all sorts of unexpected things that can happen. You can get into a car accident, you can get sick, have doctor bills, you can lose your job, or you might have to replace an appliance. An Emergency is anything unexpected you need to be able to handle immediately. One of my biggest fears was losing my job unexpectedly. For a while I worked in the software industry and it is very common to be worried about your job security. Job security does not exist anymore. Having that money set aside was really important for me so that when I did lose my job, which happened twice, I was able to cover things with no problem. That is an emergency account

I'm talking about a Buffer Account

A buffer account is just a separate savings account. You open up a separate savings account and link it to your checking account. This is easy to do. You can have multiple savings accounts and link them to your checking account. If your single, put in $500, if you're married and have kids you put in $1,000 or $1,500. This is your Buffer Account and this is going to cover unexpected monthly expenses or any surprises. By now, you should have a monthly budget. You know what your income is and you account for savings and retirement planning in your budget. You might have other goals you are saving for, but every month something unexpected could happen.

Examples of an expected expense

Maybe you have to get new tires on your car. You have to get a new TV because it broke. School is starting and you have to buy a bunch of new clothes and school supplies. Summer starting so you have to buy a bunch of extra supplies you didn't expect. Winter is coming and you realize you need some winter coats. You forgot you need a new Snowboard! These are things that are not emergencies. It's going to happen and it's part of life, but you might not always have the bandwidth to pick up that extra expense in your monthly budget. You don't want to get stuck and pull that money from important savings accounts like Emergency savings or Vacation savings. You definitely do not want to use a credit card. So you put it in a Buffer Account.

You have to plan for things to happen in addition to an Emergency

There are expenses that happen in your life. And some don't happen every month but you need to be prepared for them. They're not necessarily emergencies. Another great example is a doctor's bill. Every year you probably have a deductible on your health insurance. Maybe it's $800. So let's say in July you start a new calendar year with the insurance policy. You go to the doctors and you end up with a $400 bill because you have a deductible. This is not an emergency because it was an annual physical. You know you have to go to the doctors sometimes, right?

Start a Buffer Account today!

Do me a favor. Login to your bank account, open a new savings account linked to your checking account. It should be very easy to do and take a few minutes. Put in a couple hundred dollars. When you use it, remember to replenish it, or it isn’t You will feel so much better having this tool, I promise you. You will feel better prepared and you don't have to worry about that expense you forgot about. Have a great day!