Welcome to today’s assignment. Today, you’ll start by identifying approximately how much cushion you’d like to build. Then, you’ll figure out how you’d like to boost your savings: either by increasing income, cutting back on spending, or both. Finally, you’ll get practical by spending time figuring out the logistics of your plan. 

What exactly is a cushion?

You can think of your cushion as a cash buffer that you can draw from to pay bills or to Fill your Envelopes to full. When you have a cushion, you’re able to do those kinds of things before your new income arrives, rather than having to wait until after you get paid.

What that means is that this buffer isn’t stagnant. It goes up and down throughout the month. When you Fill your Envelopes in Goodbudget, your buffer goes down (and might even go to zero), but then it goes back up when you replenish it with money from your paychecks. 

It’s the security you need that enables you to buy groceries or pay your rent even if your current paycheck arrives late or your gas bill is high this month. 

Now that you know what a cushion is, you can start to figure out how much you’d like to build.

Step 1: Figure out how much cushion you’ll need

There’s a lot of debate by financial experts about how much the average person needs as a cash buffer (i.e. cushion). But a general rule of thumb says you should create a cushion equal to $3,000, or about one month’s worth of expenses. 

Now, you might be thinking, “Whoa, that’s a lot.” And it is! But $3,000 makes sense for the average American making about $56,000 a year (the median US income). This is because a cushion of $3,000 is about equal to one month of take home pay, or one month’s worth of expenses.

But that $3,000 number is just an average suggestion; the exact cushion you’ll seek to build will depend on your situation, your goals, and what you’re comfortable with. What’s important here is to get started building a reasonable cushion to help you break the paycheck to paycheck cycle ASAP — don’t get hung up on exact numbers.

Using one month of expenses as a starting point, here are some things to consider to help you get an estimate of a cushion you can work towards: 

Increase your cushion from one month’s worth of expenses if: 

• Your expenses fluctuate significantly from month to month
• Your income fluctuates significantly from month to month
• You expect your expenses will increase in the near future (from buying a house, getting married, having kids, etc)

Decrease your cushion from one month’s worth of expenses if: 

• Your income is fairly stable and consistent
• Your expenses are fairly predictable

At the end of the day, this estimate is just a starting point. Once you’ve grown your cushion and have lived with it for a while, you’ll have a better feel for whether or not it’s actually going to work for you in the long run. At that point, you’ll be able to make an even better estimate of how much cushion you’d like to have, and can adjust it accordingly. 

Step 2: Find your strategy for boosting savings

This is where things get fun! This step is all about helping you find your strategy for how you’ll boost your savings to build your cushion. 

Below, you’ll find a list of ideas for boosting savings. You can choose one that you like, or do a mix of them! And if none of these make sense for your situation, no worries! This isn’t meant to be an exhaustive list, and it might mean you’ll just have to spend a little extra time coming up with one or more options that do work. The goal is to find a strategy that you think you could live with for a period of time while you’re building your cushion. 

Potential strategies:

• Sell valuables you no longer need: We all have things lying around the house that we don’t need. We might even have some large appliances that need to be sold. Websites like Craigslist or Facebook Marketplace are great for this.
• Take on more hours at your existing job: If your current job could use more of your time, this could be a great option. 
• Cut back on your current spending: This is great for folks that have a few luxuries or other things that they could do without for a bit. For example, try making your morning coffee at home rather than buying out, or temporarily cut a few streaming service subscriptions.
• Pick up a gig, like as a delivery driver: Services like DoorDash and Instacart are thriving in many areas. Plus, schedules can be adapted to fit your current situation.
• Freelance your existing talents or skills: Have a desirable skill? Use an app like Fiverr to find people who will pay you for your skills.
• Rent out an asset, like a bedroom or vehicle: Got an empty spare room? Renting that out a few nights a week on Airbnb could bring in some extra cash. 

Step 3: Get practical

Once you’ve identified how you plan to boost your savings, now’s the time to get practical about how you’ll make that plan fit in your life for the next 30 days. 

Here are some tips to get you started. 

Freelancing or selling valuables? Consider your rate

If you’re freelancing or helping with yard work, then you’ll be able to set your rate for your clients. Your rate can inform how much time you’ll need to spend doing these things. 

If you’ve freelanced a particular skill before, then you might have an idea of what your new rate might be. If not, try researching locals who are in the same field to see what their rates are. Be sure to adjust your rate so that it matches your experience level.

The same is true if you’re planning on selling some valuables around your house. Find comparable items nearby and see how much they’re selling for. Consider the condition of your items and how old they are. 

Consider your schedule

To some extent, your rate will help you choose your schedule. Generally speaking, the more you charge, the fewer hours you’ll need to dedicate to your gig (or other strategy you’re using to boost savings). Conversely, the less you charge, the more hours you’ll spend. But you’ll also have to set time aside to actually find clients before you can start charging, so putting time on the calendar now will help you stay accountable to those goals. 

If you’re opting to pick up extra hours at your existing job, then you might not have a say in when you’ll work those hours or what the rate will be. But if you’re selling things on the side, or picking up a gig with a popular delivery app (like Doordash), then you’ll probably have some flexibility in choosing your hours. In that case, put that time on the calendar now. 

If you’re cutting back on spending…

You might need a budget to help you track your spending, if you don’t have one already. We’ll cover how to make a budget in more detail in the next assignment, but you can get started now! 

Try making a budget based on your previous spending, and then adjust as needed to make sure that your expenses are less than your income. 

If you’ve already been tracking your budget and spending, try looking at your past spending to see if there are areas you can cut back on.

Step 4: Set your 30-day cushion goal

Remember when we said you’d make a goal for where you’d like your cushion to be at the end of this course? Now’s when you’ll actually do it. 

Think of how you’ve decided to boost your savings, and think about how much work you can put towards that in these 30 days. If you’ve got a lot of extra time on your hands, and you feel really motivated to build a cushion quickly, then maybe aim to have one week’s worth of expenses saved up in 30 days. 

If you’d like to be a little more conservative, maybe shoot for saving about a week’s worth of your grocery budget in 30 days. 

Whatever works for you is awesome! Just make sure that it’s doable in 30 days. By having a goal you can actually achieve, you’ll feel even more motivated to keep going to build your full cushion after these 30 days are over. 

Step 5: Decide when you’d like to have your cushion built 

Considering everything you’ve learned so far, you can now decide when you’d like to have your entire cushion built. And that’s the goal you’ll be aiming for after this budget challenge ends. 

To help get you going, think about how much you’ll save each month with your strategy. Then, think about how many hours you’ll realistically be able to spend on working more, how many valuables you have to sell, or what you’ll stop buying for the foreseeable future. The answers to those questions will help inform when you’ll be able to have that cushion built. 

Or, you could work backwards and think of when you’d like to have your cushion built, then figure out how many hours or months you’ll need to spend in order to reach that goal. You can then adjust from there if the timeline doesn’t seem practical. 

Once you’ve got your target due date, mark your calendar so you don’t forget!

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That’s it for today! Now that you have your savings strategy in place and you know when you’re going to work on it, now’s the time to get started and actually do it! It’s definitely going to be tough, but remember your goal and why it’s important to you to stop living paycheck to paycheck. Putting in the work now means that you’ll have a little more peace of mind later on. 

See you in the next assignment, where you’ll learn how to track your savings cushion in Goodbudget.