How To Prioritize An Emergency Fund In Your Budget

Most founders think they have an emergency fund. Until they actually need one. They set aside a vague amount that feels right. But when the revenue dips, it barely lasts a month. I’ve seen it happen way too many times. That’s why I built my emergency fund with intention and not emotion. Here’s how I did it (and helped my clients do the same, too)- 1. Calculate your 3-month burn rate.  ⤷ This includes salaries, rent, tools taxes. That’s your base. 2. Add an extra buffer for “business hiccups.” ⤷ A slow quarter, late payments, or a surprise compliance bill. Expect the unexpected. 3. Automate 5-10% of monthly revenue into a separate account ⤷ No thinking. No skipping. Treat it like a non-negotiable expense. 4. Revisit it every quarter ⤷ As your business grows, so should your safety net. When you have a safety net, you stop making desperate decisions. You start making better ones.

We're well into 2024 and layoffs aren't stopping. Want to bullet-proof yourself? I'll tell you how, but it's hard. STOP spending on frivolous things and START building your oh shit fund. The average time looking for work is 5 months now. That's the AVERAGE meaning some it takes less, but others.... that's painful. (Ask me how I know.) What happens when what you think won't happen to you does? Are you safe? Do you have the means to protect your family from the worst? What happens when an emergency happens while you're in an out-of-work emergency? Are you covered? Are you ready to take on additional debt while desperately looking for work? These are serious questions and ones you don't want to have to consider while looking for work. Don't know where to start? Here's a basic way to get started: 1. Calculate your monthly expenses. This means logging ALL of your expenses. No, your credit card statements aren't enough. Log every dollar, every penny. Know exactly how much goes to groceries, to utilities, to daycare, to your car, etc. EXACTLY how much each month. Get a real average, not a guestimate. 2. Find the ratio of income to expenses. Let's hope it's not 1:1. You need extra cash flow here... Your target should be a minimum of 50/50 but that's not realistic for everyone. Shoot for 80% of your income to go to expenses. SAVE that 20%. DO NOT TOUCH IT. 3. But here's the kicker, the less you save, the less you have in the event of an emergency. Just think, with the above math, it'll take you 5 months of saving to save just ONE month of expenses. Lower your expenses where you can so you can increase your savings. I practiced what I'm preaching here and saved 50% of my take home pay. After being out of work for 9 months, I still have runway. My hope is that more people take their money seriously and don't take a good income for granted. Don't let short-term pleasure replace long-term peace.

I saw people come back from meetings with envelopes and a box.    Another layoff.  I wasn’t impacted that time.   But I knew they weren't done.      That feeling made me sick.       I’d seen this movie before.  The moment things go silent… is the moment you start preparing.      Freezing is not an option. Security isn’t about working harder;   It’s about taking steps to be prepared for anything.    Here are 4 things you should do so a layoff doesn't catch you slipping:  𝟭. 𝗗𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗲 𝘆𝗼𝘂𝗿 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗙𝗹𝗼𝗼𝗿 What are your essential expenses? What are the minimum expenses you MUST cover? Determine that number, multiply it times 3, save that amount. 𝟮. 𝗕𝘂𝗺𝗽 𝘂𝗽 𝘆𝗼𝘂𝗿 𝗘𝗺𝗲𝗿𝗴𝗲𝗻𝗰𝘆 𝗙𝘂𝗻𝗱 Expecting a tax refund, save it. Saving for a vacation, downgrade it and move money to your emergency fund. Compromise a little now to avoid pain later. 𝟯. 𝗗𝗲𝗰𝗿𝗲𝗮𝘀𝗲 𝗰𝗿𝗲𝗱𝗶𝘁 𝗰𝗮𝗿𝗱 𝗱𝗲𝗯𝘁. With Interest rates at 20%+, you want to pay down balances ASAP At a minimum, stop increasing your credit card debt. Do what you can pay more than the minimum each month. 𝟰. 𝗚𝗲𝘁 𝗮 𝗣𝗹𝗮𝗻 𝘁𝗼 𝗥𝗮𝗶𝘀𝗲 𝗖𝗮𝘀𝗵 In a dire situation, what could you do to raise money? Can you take on projects? Do you have things you can sell ( jewelry, designer bags, household items? ) Is it possible to get a roommate? Things are changing quickly. Pay attention to the signs and act accordingly so that you aren’t caught off guard.