Skip to main content

Runway

How secure you are right now.

Importance​

Runway tells you how long you can last off reserves if you had no income at all, measured in a number of whole months.

Essentially, Runway tells you how secure you are right now.

Calculation​

Runway formula

Considerations​

  • Bank Balance is defined as all the cash you can get into your checking account within 48 hours without significant penalty.
    • Bank Balance should only include highly liquid assets. Retirement accounts and home equity do not count because they cannot be quickly and easily converted into cash.
  • Average Burn is defined as how much cash it costs you to live. (averaged over multiple months)
  • Months of Runway is always rounded down.

Average American Runway​

Statistics vary, but the general consensus is that most Americans have less than 3 months of savings. Obviously, this is not good enough.

danger

Having this little of Runway to fall back on means you are ALWAYS within 3 months distance of bankruptcy if you lost your job.

You want at least 12 months of Runway underneath you. Whatever that number happens to be will be determined by how much money you spend every month.

Know Your Numbers!​

Do you know how much runway you have?

If not, figure it out.

Increase your Savings Rate