Method in a nutshell
- Use a spreadsheet to model the Smooth Sailing account.
- Enter the account's expected transfers in and transfers out by date.
- Start the modeled running balance at zero.
- Let the modeled balance go negative.
- Find the lowest negative balance in the model.
- Turn that number positive.
- Round up to a clean buffer amount.
Why the account needs seed money
A Smooth Sailing account needs seed money before it can do its job. Regular paycheck transfers may cover the average cost of predictable lumpy expenses, but averages don't tell you how much cash the account needs on hand when several bills cluster together.
The simplest way to find that buffer is to model the account in a spreadsheet. List the expected transfers in and transfers out by date. Start the running balance at zero, and let the balance go negative. That negative balance isn't pretending your real account can go below zero. It's a stress test.
The lowest point in the model tells you how much seed money the account needs. If the spreadsheet reaches -\$1,030, then the account needs at least \$1,030 in starting cash. Round that up to a clean number, such as \$1,100, and use that as the starting buffer.
Once that buffer is in place, the regular transfers can keep the system moving. The point isn't to guess at a comfortable number. The point is to launch the ship with enough cash that the planned waves don't swamp it.