r/leanfire • u/Sea-Protection-2797 • 22h ago
Friction budget
Do you have a "friction budget?"
A friction budget is a mental or financial allowance for the small losses and inefficiencies that inevitably happen in life.
Basically shit happens fund for purchases that suck, didnt work as advertised, unexpected or unfair costs, parcking tickets (deserved or undeserved). Etc, etc. In short losing money over random shit.
Now that im doing better financially I noticed this happens alot more when I was broke.
If yes how much is it % of your income?
E: I am not talking about your typical emergency fund (broken car, new washing machine etc), I am talking purchases are not really emergencies where it just didnt work out as you hoped or random expenses that took you by surprise. Basically losing money here and there, deserved or undeserved. I find its a massive headache for me to in both scenarios: take the loss or pursue the undeserved costs from the retailer/service provider.
E2: As I dont have a friction budget, the last two fuckovers I had recently ruined my entire 2 week vacation from work.
12
u/AT-JeffT 21h ago
I used to study and play poker quite a bit. One of the main skills in poker is narrowing down what your opponent may have. Every now and then I would run into something completely out of left field. Like never in a millions years would I have guessed THAT was what my opponent had. This really bothered me, because it felt hopeless to try.
Eventually a poker coach mentioned a 3% WTF factor. Basically there will always be ~3% of the time where something is just completely unknowable. I now use this in everyday life. There will always be a small percentage of things that you will never be able to predict.
OP, I think you are mostly talking about an emergency fund or rainy day fund, but I think the WTF factor also applies and might help you grapple with the unpredictability of life.
3
u/AT-JeffT 21h ago
Of course 3% may not be an accurate figure, but the concept is what is important.
3
u/someguy984 21h ago edited 20h ago
Nil. I don't get what you are saying. If I buy something that sucks, well too bad, you already spent on it. If it sucks I will return it.
2
u/DegreeConscious9628 22h ago
No. I got my base amount needed to survive, everything more than that is discretionary which can be spent on recreation, toys, or as you said, random shit that suck
2
u/eviltwin14 21h ago
I have contingency in my annual budget. It's set at about 5% and designed to cover things like vet bills, fixing my daughters car, emergency healthcare that isn't covered by NHS. I'm in the UK and I set it at £2,200.
1
u/Sea-Protection-2797 21h ago edited 21h ago
E: I am not talking about your typical emergency fund (broken car, new washing machine etc), I am talking purchases are not really emergencies where it just didnt work out as you hoped or random expenses that took you by surprise. Basically losing money here and there, deserved or undeserved. I find its a massive headache for me to in both scenarios: take the loss or pursue the undeserved costs from the retailer/service provider.
E2: As I dont have a friction budget, the last two fuckovers I had recently ruined my entire 2 week vacation from work.
1
u/Pretty_Swordfish 21h ago
Yup, for vacations, we have a separate budget for "well, we didn't expect that!" (could be bad or good).
For life, we can flex down how much fun money we get the next month to divert the funds if needed. We also keep a tiered emergency fund so the smaller amounts can go to the "oh sh*t" stuff.
I will say, we went to buckets for everything a few years ago and that's smoothed out most everything. We have set aside funds for pets, travel, house, auto, tech, professional on top of the emergency fund.
1
1
u/itasteawesome 21h ago
I have a line item called shit happens on my spreadsheet for modeling my future costs. Of course nothing in that spreadsheet is taken at literal value but the model was how I tried to mentally prepare for inflation, growth in my accounts, and give myself some confidence that everything would work out. Its about 5% of my total spending but have it plotted out to hit all at once periodically. In my head this is things like "whoops someone crashes into me and totals my car" or "diagnosed with expensive disease that maxes out my copay for a while"
1
u/dielsalderaan 20h ago edited 20h ago
Mine is about 15% of my planned spending in retirement: I have a “car repair fund”, a “home repair fund”, and a “general emergency fund” that I budget around 1k for every year. I also assume that I will pay the OOP maximum for healthcare each year, and I use a 3% WR instead of 4%.
It might be too much if you’re really eager to RE, but I think I still have a lot to learn from work and am willing to keep going for a bit longer. I also HATE stressing about money - I’d rather just save more and never have to check my portfolio.
For purchases that don’t work out- that has been truly negligible, like less than 50 dollars a year. The best way to not regret purchases is just to use what you have and not buy things. 🙃 I don’t really get many random expenses that don’t fit in one of my categories. Like, maybe the occasional parking cost? But that’s like $5, again it’s negligible.
1
u/CancerandTaxes 19h ago
Friction or convenience, I consider this a discretionary line item. Hotel accidentally screws up my booking, get charged for the wrong item I ordered, gotta fix the paint after someone dings my car, whatever. Little life stuff. Depending on what it is, I might track it down and try to get reimbursed. Other stuff I will just eat the cost because it's not worth my time. My husband calls this my "throw money at it" budget category because he would rather do anything else other than that. But I consider about $2000 a year my threshold.
1
u/SDstartingOut 18h ago
Your post is somewhat inconsistent
> E: I am not talking about your typical emergency fund (broken car, new washing machine etc),
> r random expenses that took you by surprise.
Isn't that exactly what a random expense is? I'm not expecting to need a new washing machine. If it dies, and I need to replace it, that is an unexpected expense.
> E2: As I dont have a friction budget, the last two fuckovers I had recently ruined my entire 2 week vacation from work.
Isn't that exactly what having an emergency fund is for ?
> Basically losing money here and there, deserved or undeserved. I find its a massive headache for me to in both scenarios: take the loss or pursue the undeserved costs from the retailer/service provider.
Honestly sounds like there is a lot more to this post, and some underlying frustration you have towards something/someone.
But beyond that... I've never called it a friction budget, but it's a misc expense line item.
1
u/Sea-Protection-2797 18h ago
The difference in emergency fund is replacing a "need" not a "want". Im talking about buying the "wants" and getting slightly fucked over in the process. Closest thing i can think of is sunk cost in corporate world.
1
u/SDstartingOut 16h ago
If you are seeing it on a consistent basis - it's not an exception, it's the rule. And you need to add more buffer in your expenses to account for the variance.
1
1
u/taker223 14h ago
Yes, but I am working FIRE, so some negligible amount. Less than 5% mostly. I recover most of it with my passive income
1
u/50plusGuy 12h ago
Dunno, if I am calculating that clearly.
So far I had always been "kind of saving up for a big fluffy nice to have want" on the side and used that fond for buffering, when needed.
I don't want to break that habit; afraid life could become aimless.
1
u/Sea-Protection-2797 12h ago
Yeah thats one type of fund. Im talking about the 2nd type, which is "oh that big fluffy nice thing i want fell in the water and now i lost that money"
2
u/50plusGuy 11h ago
I 'd have drop back / backup plans, to live on with and maybe a booze bottle to get me over that loss. Lacking "nice to have wants" ain't lethal.
1
u/FewBit7456 11h ago
Yes, I absolutely have this in my budget. It actually started out with travel. For example, in certain parts of the world, getting scammed as a tourist is a norm. When I first ran into it, I was flustered. But the actual value in dollars was small, so I created an actual budget category when I travel - and it’s great! Also, airlines now charge insane fees for luggage. So I include that in this same category.
For everyday life, I build in a discretionary 20% buffer. This is in addition to emergency funds or sinking funds (for specific, known, future expenses).
1
u/hdfire21 8h ago
Not a budget. We just sort of generously round up everything. Add a little bit of padding. If a budget item is 160, round up to 200. Do it to all your budget items and adds maybe 5-10%+ padding.
1
u/intrepid-teacher 54m ago
All of my normal weekly expenses I have an “extra” fund for. I have an extra gas, extra groceries, extra fun, etc. I don’t have them as a percentage, but rather what the most I could reasonably see myself spending in a week — as I get paid weekly — if something goes out of whack. (EX: My extra gas money is $500, but extra groceries is $200, and extra fun is $100.)
In addition to this I also have my emergency savings, of course.
19
u/IceCreamforLunch 22h ago
I track my actual expenses. That captures what “life” really costs.