Personal finance
Emergency fund
How much cushion you need, how much is missing and how long it will take.
What it is for
To put a figure and a date on the cushion, which is what turns it into a goal instead of a good intention. It is the step that comes before investing, not after.
How to use it
- 1Expenses are what one month of living costs: rent or mortgage, food, utilities, transport and the bills that arrive no matter what.
- 2The months depend on how stable your income is, not on your temperament. With variable or self-employed income, six is on the low side.
- 3Count only what you can withdraw tomorrow. Anything locked up is not a cushion.
How to read it
The figure that changes decisions is not how much is missing, but how many months you last today. Knowing you last 2 says more than knowing you are 6000 short.
If the timeline is long, the two levers are lowering the target —start with one month and build— or raising the saving. Stretching the timeline is not a third option: it is what happens if you do not choose.
This money is not meant to earn. Its job is to be whole and available on the bad day, and anything that makes it earn makes it slow or shrink exactly when it is needed.
The terms that appear here
All the calculators
- Position sizeHow many units you can open without exceeding the risk you decided on.
- ExpectancyWhether your method makes money long term, and from what win rate it starts to.
- Option break-evenThe price at which your option actually starts winning, and what it can cost you.
- Compound interestWhat your monthly saving turns into, and how much of it you actually put in.