Saving feels great. Lots of my clients are surprised to find that, while they thought that the process of saving money was going to be a lot of drudgery and deprivation, once they start to see their balances climb, seeing those numbers can have an addictive effect. The same goes for debt payoff: once clients see those numbers going in the right direction, they feel motivated to keep the progress going, and often get inspired to delay gratification in other ways so they can reach their big goals faster.
If you are using goal accounts, you probably have a few familiar categories: emergency fund, slush fund, non monthly expense fund, and travel fund are a few. Hopefully, you’re automating your contributions into a high yield savings account, and so you see that money grow over time, inching up until you reach your targets.
But of course, there may come a day when you need to use those funds, and sometimes seeing those numbers you worked so hard for take a hit can feel like a setback.
It’s important to remember that using your emergency fund to cover an emergency or using your slush fund to, say, replace a computer, does not make you a failure. Life happens, and covering those costs is part of every financial plan. Still, you may feel the need to replenish those accounts sooner than later, especially if you anticipate that you’ll need more cash for upcoming spending in those categories.
There are a few things you can do to prioritize your savings after unexpected expenses that will help you get back on track.
Keep automating your savings.
Hopefully you have a “set it and forget it” system for putting a base amount into your goals accounts. If not, set one up!
2. If you have the flexibility, increase your savings so that you can get back to the original balance.
This may mean that you temporarily reallocate a portion of another fund to get back where you need to be. You may need a slush fund before you need to travel, for instance, so you could take a few bucks a month from one and move it to the other. If you have a pretty healthy emergency fund, you can reduce your contributions to that temporarily so that you can fund upcoming expenses.
3. Reduce your expenses to beef up your savings.
If you know you need some slush money for a new phone for a one time purchase, look for room in your budget in other ways. Can you spend $25 less per week on groceries? Can you skip a lunch out with coworkers or make coffee at home? Even doing this temporarily can help to get you where you need to go. Just be sure it gets where it needs to go! If you skip a lunch you had budgeted for, move the money over immediately so it doesn’t get repurposed.
4. Try to bring in some extra money.
I know this is an obvious one, but if you can’t reduce your expenses, you’ll need to increase your income. This could be through taking a side gig, doing some house sitting or dog walking, selling those clothes with tags that are hanging in your closet, or whatever opportunities you may have available to you. Every little bit counts!
Remember, don’t beat yourself up for spending money on the thing that you saved the money for. This is all part of the plan, and your financial plan is intended to evolve over time. Stay the course, and pat yourself on the back for being prepared for the unexpected in the first place.
What can I do to replenish my savings after I’ve had to dip into it? is written by Terri Bennett, A Certified Financial Trainer for financialgym.com