Why Can The Reserves and Future Fund Budgets Go Negative?
The majority of the budget categories cannot go below zero, meaning that if a student spends more than they budgeted in that area, they’ll need to make up for it somewhere else.
The only exceptions to this rule are the Future Fund and Reserves budgets in Life Scenarios and Advanced Budgeting, respectively. These categories represent how much the student has left over after creating their budget. In other words, their savings. When a student spends more than they budgeted or goes into debt, these categories allow the student to account for that in their budget. This way, students can easily visualize how these choices affect them, even if the money isn’t missing from their bank account total.
This is easiest to visualize with debt. If the student has $200 in their checking account and spends $300 on their credit card, it may appear on the surface that they still have that $200 when they actually now owe it (and more) to their credit card. If the student has enough money budgeted in other areas, they can pull from those to make up for it. If not, they can reflect this negative balance in the Future Fund or Reserves budget.
When the student adds money to the negative number, it will get closer to zero. If they keep doing this, they’ll eventually reach a positive number again. This means that they’ve accounted for the debt or misstep in their budgeting and can now begin to consider excess money in their budget as savings.
Let’s look at an example.
In Scenario #8 of the Warm-Up, the student gets injured and needs to pay $450 for a trip to the hospital.
The student doesn’t have enough money to pay for that $450. Because of that, the student pays for the hospital bill through their credit card and reflects that payment in their Reserves budget.
They subtract $450 from the $192.21 budgeted in Reserves, leaving them with $-257.79 in that category. This number represents how much they need to save in order to make up for this debt in their budget.
As the Warm-Up continues, the negative number in Reserves will increase as they get into more debt. When they get their next paycheck, it will be at $-312.79.
With the money from this paycheck, they can begin to chip away at that negative number while continuing to budget for their other needs.
Eventually, the student will earn enough to take their reserves back to a positive number, which represents that they have budgeted enough to pay off their debt and can begin to save their money once more.
