Emergency funds have become a personal finance must-have in today’s environment.

Their very existence is based on the premise that you will need to find convincing ways to save an extra $2500 for unexpected car repairs or an extra four months salary because you were suddenly downsized and you still need to pay the mortgage.

That’s life, and unfortunately for us, bad sh*t happens.

But, if you’re a diligent saver, you’ve probably reached a point where your emergency fund has become fully funded (say six months salary) and now you’re curious about what to do with the spillover cash.

Should you go a live a little? Absolutely! Life is short and you should enjoy it within the means you have at your disposal.

But if you’re like me, after a few purchases or weekend getaways, your desire to live it up eventually dissipates and you’re not as interested in another weekend at the beach or cruising Craigslist for buried treasure.

So your savings account balance begins to build again. But now that your savings goals are different (e.g. your emergency fund is full), what should you do with all of these extra funds?

I break it into a separate account, and I call it my confidence fund.

Me and My Confidence Fund

My confidence fund is that little number in the back of my head that allows me to walk a little taller, shake hands a little firmer, and speak with a little more authority when the subject of money comes up.

Not to mention, it allows me to live, well, more free than I used to be.

A few examples:

1. The ability to take a last minute flight anywhere I want. The girlfriend and I have been considering a trip to Brazil for a few months now. Who’s to say we can’t make a reservation tonight, and leave tomorrow if the sudden urge hits us.
2. I like that car, let’s write a check for it. I now have the ability to walk on a car lot and write a check for nearly any car I want. I haven’t done this yet, but having the capacity to do so is immensely gratifying.
3. Going to sleep at night without worrying about tomorrow. I’m a self diagnosed worrywart. Having more cash on hand than I will ever need in the event of an emergency makes this insomniac sleep more soundly than ever before. Even the most trivial of things can keep me awake at night, but rarely does the subject of money enter my mind once I my head hits the pillow.

The point of the confidence fund isn’t to become something I’m not, or drop $40k on a new BMW just because I can. That would never happen because I like earning 5 percent on my cash with my high yield rewards checking account too much.

But what it does, is allow me to know that I now have the ability to do what I want (within reason), when I want to do it.