Never Retire - Covering Incidental Expenses

Make it so your checking account doesn't feel a thing

We all have those random, everyday expenses that are difficult (and annoying) to budget for.

For example, I go to yoga 5-6 times a week. I count the $169 I pay each month for my membership as a fixed expense. When I run income versus expense calculations, this is one of the things I include.

However, I don’t include the $1.50 I pay for parking each time I go to yoga. That’s between $7.50 to $9.00 a week—$30.00 to $36.00 a month—that goes unaccounted for.

Along similar lines, I have a pretty good handle on what I spend each month for groceries. This fixed expense makes into my “official,” mostly mental budget. Dining out or stopping at the local coffee or bagel shop doesn’t.

We all have these incidental expenses.

It’s a pretty good guess that people who budget traditioinally (pie chart, on paper) don’t accurately capture every dime they’re spending because of incidental expenses. Even if they account for parking, eating out, and buying coffee, there’s (a) likely other incidental expenses they miss and/or (b) they underestimate the ones they do keep track of.

Depending on your personal financial situation, this could create a problem.

One potential solution actually goes back to something we discussed the other day:

As for my third income source from this newsletter. It comes in pretty much daily as new subscribers sign up and existing subscribers renew (thank you!). I tend to keep these payments in my checking account as a cash cushion and to help absorb discretionary spending. Some of it ends up in my pots of money.

This newsletter—my third source of income after writing I do for a private client and Medium—pretty much covers these incidental expenses.

In full transparency, I typically receive income from this newsletter 4-5 times a week. Payouts range from about $4.00 to $150.00. August’s median over 20 payouts was $7.88. The average was $25.62 for a total of $512.36.

As an aside, I do this newsletter because I love writing it, it complements my other writing nicely, and it helps me better manage my money today and vision/plan my financial future. On that alone I plan to be in it for the long haul and will continue to explore ways to evolve what we’re doing here. Plus, my earnings continue to trend up. So that’s encouraging.

That said, I always appreciate new subscribers and those of you who upgrade to a paid subscription. Right now, you can save $10 on an annual subscription. Alternatively, if you become a founding member for a minimum of $100 I will convert you to a lifetime subscription. So you’ll pay whatever you choose to pay once and never get charged again.

Anyhow, that $500 a month contributes to my checking account cash cushion, which absorbs most—and sometimes all—of these incidental expenses.

I consider two categories of discretionary spending—

• Spending on things you don’t need that you “officially” account for, such as a yoga membership.

• Spending on things you don’t need that are incidental to your core spending.

Unexpected, but necessary expenses (e.g., a flat tire) come out of my checking account cash cushion or rainy day fund.

Bottom line—as you craft a strategy to head into relative old age, work matters as much as, if not more than anything else. The type of work you do and how your income flows.

I break it down so my three income streams satisfy specific financial obligations (needs, wants, and allocating cash to my pots of money) with flexibility. The third one—even though it’s the smallest at the moment—isn’t any less important than the first two.

Because it lets me spend with confidence and my checking account doesn’t feel a thing.

Consider how you can devise a cash flow strategy that does likewise, adapted to your unique personal, professional, and financial situation.

A new Frank Gehry building in Downtown Los Angeles. Not a fan.