I was 30 years old when I got the phone call that my dad had passed unexpectedly. Most of that day was spent shopping for airline tickets, gathering funds together for funeral expenses and packing. Although this was a very sad time in my life, I do remember being grateful for the rolling funds I had set up.
What is a Rolling Fund?
Basically, this is a mini savings account for a specific item. You contribute to it on a monthly basis so that when the time comes to pay that expense you don’t have to come up with a huge chunk of cash all at once.
My rolling funds include gifts (Christmas, birthdays), property taxes, insurance, jiu-jitsu (I pay yearly), car registration fees, vacations, pet expenses, home improvements, clothing, etc. Imagine trying to come up with $3,000 for property taxes in one month? I don’t know about you but the only way I would ever be able to come up with all of that at once would be if I fell behind on some of my other monthly expenses. To prevent the “property taxes are due this month” headache I simply contribute $250 to my property tax fund on a monthly basis. If I get a bonus then I apply part of it to this fund and adjust the monthly contributions accordingly. Pretty cool huh?
Rolling funds will help you remember certain expenses that happen on a yearly basis, an example of this is my $50 alarm permit. Come September I will pay for the permit out of my rolling fund, in October contribute $50 into the permit fund and call it a day. I do this for two reasons: 1) If I don’t set the money aside immediately then I forget all about it until I get the bill in the mail which in turn makes me mad because it messes up my budget 2) The faster I set the money aside, the faster I can move on with my life and forget all about it for a whole year.
You can set up rolling funds for whatever floats your boat. However small or large they maybe, if it works for you that’s all that matters.
Where do you keep these funds?
My funds are all rolled into one savings account that is linked to a checking account. Whenever I need to use up money from a fund I simply transfer the appropriate amount over to my checking and move along. No need to get all fancy pants about it and set up a brokerage account or anything like that. This is very basic stuff that is designed to help keep you in line with your budget while you pay off your debt. Remember the emergency fund needs be kept far away from your checking account, keep it in a totally separate bank.
Who needs a rolling fund?
Everyone. If you have children then you probably need to set money aside for school expenses (supplies, clothing, etc). If you own a home then you know there are ALWAYS unexpected expenses that come along with home ownership, just two months ago I had to dip into my home improvement fund for a french drain. Early last year I dipped into my vacation fund to buy airline tickets after my dad passed away. Technically this could have come out of my emergency fund but it made sense to take money out of my vacation fund since I was buying airline tickets (my portion of the funeral expenses did come out of the emergency fund).
At some point or another Murphy is going to come a knocking, and it’s best you be prepared. What’s nice about having these funds is the peace of mind you will have when unexpected expenses come rolling around. Obviously, you can’t plan ahead for everything but do your best with planning for those expenses you know are coming. You dip into these funds when you need them and then build them back up. The same principle applies to the emergency fund (except of course use this money for emergencies only).
I would love to hear from you in the comments below. Do you keep any rolling funds in your budget? If so, what are some your rolling funds?