"How much money do I have?" is a good question. A better one: without new income, how many months can you live? That is your financial runway.
In financial health, this pillar is the "emergency fund." The free checkup compares you to a six-month target.
How do we calculate it?
Months of reserve = accessible, low-risk assets ÷ essential monthly expenses
Example: 60 million in short-term deposits, 10 million in monthly expenses → 6 months.
Count only money you can access tomorrow. Gold and stocks are usually not the right place for an emergency fund (why?).
How many months is enough?
- Less than one month: high risk
- One to three months: a start; for stable income
- Three to six months: a common target
- Six months or more: more sensible for unstable income
Why does it matter more than "total assets"?
You might have 500 million in assets, but 400 million locked in stocks and only two months of cash expenses. In a crisis, the "total" does not help; access matters.
Months of reserve tell you how much time you have to make the right decision.
How to improve it
- Write down your real essential expenses
- Use a separate account for reserves
- Build reserves to three months first, then diversify the portfolio
- From every extra income: send a percentage straight to reserves
Summary
Calculate this number today. If it is under three months, that comes before "the best stock."