What's the reservoir?
Your financial water supply that you want to keep full but not overflowing
The Simple Answer
The reservoir is your unallocated money - think of it like an actual water reservoir that supplies your city. You want to keep it full enough to handle droughts (unexpected expenses) and supply your ongoing needs (budget funding), but if it gets too full, you should consider investing that excess water elsewhere.
The reservoir analogy
Just like a city's water reservoir, your financial reservoir serves multiple critical functions. It's where all your incoming water (income) flows, and it's what supplies water to different parts of your city (budget categories) when they need it. Most importantly, it's your insurance against dry spells and unexpected water main breaks.
How Your Reservoir Works
Your reservoir is your emergency fund
One fund, multiple purposes
Unlike traditional budgeting advice, Cushion Budget recommends using your reservoir as your only emergency fund. This simplifies your finances and ensures your safety net is always visible and accessible.
Don't fear using it
Your reservoir is meant to be used! Don't feel guilty about drawing from it for true emergencies or important opportunities.
What expenses should I use my reservoir for?
We recommend using your reservoir for all types of unexpected expenses like medical bills, car repairs, or other large purchases. Don't set up a bunch of different categories for these expenses - just use your reservoir.
Reservoir levels: Not too little, not too much
Cushion Budget measures your reservoir level using something called the cushion - this tells you exactly how many weeks your current reservoir can cover your expenses and spending. Think of it as your reservoir's "weeks of supply" gauge.
Less than 4 weeks of expenses. You're vulnerable to any unexpected costs. Focus on building up your reservoir before other financial goals.
3-6 months of expenses. You can weather unexpected storms while still putting your money to work. This is your sweet spot.
More than 6-8 months of expenses. Your reservoir is overflowing! Consider investing the excess in index funds, retirement accounts, or other growth opportunities.
How to build up your reservoir
Building your reservoir is like increasing your city's water supply. Here are the main ways to fill up your financial reservoir:
In Cushion Budget, you can set how much money you want to save to your reservoir each week. Increasing this amount is the most reliable way to build your reservoir over time.
Every paycheck and source of income flows into your reservoir first. The more you earn, the more water flows into your reservoir before being allocated to budget categories.
If you've over-allocated money to certain budget categories or no longer need funds for specific purposes, you can transfer that money back to your reservoir.
Refunds, bonuses, tax returns, and other windfalls naturally flow into your reservoir, giving it a nice boost when they arrive.
⚖️ Disclaimer
The information provided on this page is for educational purposes only and does not constitute professional financial advice. Cushion Budget is a budgeting tool, and we are not licensed financial advisors. Always consult with a qualified financial professional for advice specific to your financial situation. Your use of our app and any financial decisions you make are your responsibility.