Author Topic: Benefit of "Life Fund"?  (Read 1509 times)

sabertooth3

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Benefit of "Life Fund"?
« on: November 20, 2014, 01:29:43 PM »
My wife and I pull in between $1,500-2,000 in savings every month. When I brought up putting it toward mortgage or investing, she brought up an option C, which was to put $1,000 to mortgage/invest (whatever we eventually decide) and then $500 to a "life fund" separate from the emergency fund. The life fund would be for things like a deck (we just moved into our house), an international trip before we have kids, and general expenses like that.

I'm interested in the Mustachian community's thoughts on this practice, if anyone does it how well it works, and if you wouldn't do it, why not. Thanks!

GGNoob

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Re: Benefit of "Life Fund"?
« Reply #1 on: November 20, 2014, 06:11:46 PM »
Assuming you have a good rate on your mortgage, I wouldn't bother paying that off early (unless you have PMI, which if you do, keep paying more to get rid of that).

With your "life fund," you are basically saving for things you want...like upgrades to the house and vacation? If so, I don't see any downside to having that. My wife and I basically have an "All Other Spending" category in our budget. We decided to combine a lot of categories into one (household essentials, entertainment, travel, etc). So now if we cut back spending, we can roll this budget over every month to allow it to grow and then take a vacation or buy whatever we want. We feel it is very important to be able to travel, so we like having a budget that allows us to do that.

As a couple, you need to decide what is important in your life and set up your budget accordingly.

sabertooth3

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Re: Benefit of "Life Fund"?
« Reply #2 on: November 21, 2014, 06:22:52 AM »
Assuming you have a good rate on your mortgage, I wouldn't bother paying that off early (unless you have PMI, which if you do, keep paying more to get rid of that).

With your "life fund," you are basically saving for things you want...like upgrades to the house and vacation? If so, I don't see any downside to having that. My wife and I basically have an "All Other Spending" category in our budget. We decided to combine a lot of categories into one (household essentials, entertainment, travel, etc). So now if we cut back spending, we can roll this budget over every month to allow it to grow and then take a vacation or buy whatever we want. We feel it is very important to be able to travel, so we like having a budget that allows us to do that.

As a couple, you need to decide what is important in your life and set up your budget accordingly.

Thanks- yeah we have a 4.125% rate so the market would probably get better returns. It sounds like you have a good compromise there, maybe I'll try bringing that up.