Do You Need a Slush Fund?

What do you do when you want to indulge in life’s little pleasures but your budget says otherwise? Or maybe your partner has a tight leash on the finances so you couldn’t blow a few bucks even if you wanted to? 

You create a slush fund! But what exactly does that mean? Is it the same as an emergency fund, and is it something you absolutely must have? 

What Is a Slush Fund?

In a nutshell, a slush fund is a stash of money you set aside each month to spend however you please. It’s not the same as an emergency fund, which should only be used when a financial emergency arises and you don’t have the room in your budget to cover it. 

So, whether you want to buy a new pair of shoes, splurge on a night out with friends, or take a quick and cheap road trip with friends, a slush fund will have you covered as long as the money’s there. 

Is it an absolute must? Not necessarily, but it helps to have a pool of money that’s dedicated to your wants. That way, you won’t have to worry about blowing up your budget every time you get the urge to buy something you didn’t plan for. 

The amount you allocate to your slush fund will depend on your financial situation and spending patterns. If you’re barely making it by and have very little in your emergency fund or high debt balances, it’s probably not a wise idea to put too much money in your slush fund. A few bucks will suffice until you’re in a better financial position. But if you earn a decent sum of cash, have a solid handle on your finances with very little debt and disposable income to spare, you’ll have a bit more flexibility. 

Read on for some reasons why you should consider creating a slush fund if you don’t already have one.  

The Case for a Slush Fund

Reason #1: Your budget is too tight. 

Contrary to popular belief, deprivation budgeting doesn’t work. But it’s music to the ears of financial gurus who believe cutting back ruthlessly is the only way to get ahead. It’s one thing if you have more bills than money and be left with no other choice but to cut costs to make ends meet. However, if you have a budget that works but leaves very little wiggle room, you could be setting yourself up for failure. 

Think of a binge diet. It works in the short-term to achieve your weight loss goals, but the minute you spot your favorite unhealthy dish, it’s off to the races and only goes downhill from there. Deprivation budgeting works the same way. You go cold turkey on your spending instead of scaling back on wasteful spending so you’ll have some cash to use for things you enjoy most. But you have that one fun night out sending your spending plan up in flames, and the rest is history. 

There’s nothing wrong with a tight budget if you’re committed to achieving a financial goal in the shortest period possible. But you’re human and there will come a time when you want to live a little, even if it’s just for a moment. 

A better idea: build a slush fund that gives you the freedom to occasionally indulge in those “wants” without feeling guilty. You don’t have to go overboard, but you also shouldn’t beat yourself up for wanting takeout once a month because there’s no room for it in the budget. 

Reason #2: You enjoy entertaining others. 

If entertaining others is your thing, you need a slush fund. The costs you’ll incur while hosting guests can be astronomical, especially if you frequently open up your home to family and friends who need a place to crash or are in town for the holidays. And you may feel obligated to prepare home-cooked meals or order take-out for your guests for the duration of their stay.

You must also consider the cost of gatherings, both large and small. Unless you have potlucks where everyone brings a covered dish, you could find yourself in the hole financially. And don’t forget to factor in the cost of liquor.

But if you have a slush fund, you’ll know exactly how much you can afford to spend entertaining others. And you won’t have to worry about wrecking your budget. 

Reason #3: You deserve a pat on the back.

Is your job stressful? Almost every person reading this is thinking, “absolutely” or answered this question in their head with a resounding “yes!”. For this reason, you deserve to pat yourself on the back for staying in the dog fight until you can find relief through a less stressful job or career. 

The problem is your financial goals don’t care about how stressful your job is. Consequently, your budget is designed to ensure you hit important milestones on time and doesn’t make room for expenses related to rewarding yourself for a job well done. 

So you need to create a slush fund to take care of the costs associated with rewarding yourself even if no one else does. 

Reason #4: You want to make self-care a priority. 

Have you been neglecting your personal needs out of guilt? If your finances are in shambles, that’s understandable if you’d prefer not to do any additional damage. At the same time, you must take care of your body if you want it to function at an optimal level, which is why self-care is a must. 

You don’t have to spend hundreds of dollars on spa treatments every month. A smarter idea: sock a few dollars away in a slush fund and pamper yourself in the comfort of your home. Buy a foot bath and supplies for a manicure, pedicure, and facial. Conduct an online search for DIY spa treatments or binge out on YouTube tutorials until you find one you like. And don’t forget to spend the rest of the day relaxing. A little downtime can go a long way.

Reason #5: You love to travel. 

Some spend months or even years planning for the vacation of their dreams. These individuals budget and save diligently so their dream can become a reality, and they have the time of their life. But unfortunately, they may only be able to get away once a year. And if the trips are abroad, there could be more time in-between each excursion. 

But maybe you’d prefer to frequently take mini-vacations to escape from the hustle and bustle of everyday life. And if money’s tight, staycations are just as suitable as long as you have time to unwind. 

That’s where a slush fund comes in. If you’re able to load it up with enough cash, you won’t have to think twice about hopping in your car for a weekend getaway or booking a room in a desired part of town for an epic staycation. 

Reason #6: You’re married or in a relationship and want your own stash. 

Whether you’re married or in a serious relationship, money fights can make or break your union. And they usually stem from one thing: how the money was spent. 

To illustrate, if your partner wants to live life no matter the cost but you’re more on the frugal side, you may start to question their spending habits. Maybe they want to spend like it’s their last day on Earth while you want to save for the future. 

Another source of argument is financial goals. If two people are together but aren’t on the same page about what they’re working towards, things could quickly get out of hand. For example, if you’ve been depositing money into joint savings account with your partner in hopes of saving up enough for a down payment for a new home and your partner has been spending the disposable income they could be saving, there probably won’t be a happy ending. 

The good news is despite spending habits, a slush fund could bring some much-needed relief to your relationship. How so? Well, the two of you could sit down and decide on a reasonable amount for each person to “blow” each month; no questions asked. And that’s what will make up the slush fund. Problem solved. 

The Bottom Line 

No need to feel guilty about spending money on wants every once in a while. Instead, take a look at your budget and decide how much you can afford to allocate to a slush fund to take the stress out of living a little. You’ll be so glad you did, and your budget will thank you.