Financial
Finance Series: The Buffer
I was talking to a friend of mine the other day when his wife called him to say her direct deposit pay check hadn't gone in. He immediately checked the bank account for his pay check and to his horror discovered his didn't go in either. What made this such a financial crisis wasn't that he was massively in debt or financially unstable, in fact quite the opposite. This crisis was about the automatic payments for the mortgage, loan and utility bills, that were due to come out of that account on the same day as their deposits were supposed to go in.
This brings me to the first part in our home maintenance financial series, "Maintaining a Financial Buffer". It's actually a simple concept but one that I've noticed a lot of home owners tend to miss. A reserve of funds. As a general rule you want this reserve "buffer" of funds to be enough to cover the various payments during any two week period of a month. This is to give you the time to correct the problem without panic or late payment fees. Any home maintenance program should also include this particular financial aspect. These are also the, commonly referred to as, "rainy day" funds. Who wants to find out on Friday that there's a problem with their account and nervously "stew" with this information for the rest of the weekend, only to take time off Monday to scramble to the bank trying to save your home.
Banks are usually quite accommodating if the problem was cause by them but not so much if the lack of funds was due, for example, to a communication "gap" between you and your spouse. Have you ever written a check and forgot to record it? Have you ever bought something but forgot to tell your spouse (that does the family bookkeeping)?
