Emergency Fund

Before we go deeper into earn more and save more as principles we need some basics to be taken care of.

First thing first we need to focus on having an emergency fund for at-least six months. I am not saying a 6 month runway to be taken care but a 6 month distressed runway must be taken care. This will allow you to breathe better and focus on other aspects.

What do i mean by distressed runway or emergency runway?

By stripping down all the bells and whistles of your spending and bringing it down to just the basics/essentials. Things that you will need just to survive like food, water, shelter for 6 months and you can merely survive. Keep that 6dx away as an emergency fund so that you can go and work on other things.

My distressed fund template looks like this

Healthy food (no eat outs whatsoever), home utilities (electricity, water, wifi etc), home (preferably free of debt or rent), kids(school fees), elderly care (medicines etc) and nothing more. If you don’t have kids or parents to take care, you can leave those items in the calculation.

Imagine a scenario where you need to be absolutely locked down at home and have no job. In that state what is your runway looking like. Bare essentials is what must be a part of distressed funds.

Keep this fund ready. You need this in your savings or FD before you start this exercise. This is bare minimum.

If your distressed X is very high due to debts and other commitments you are in serious trouble my friend. Ideally your distressed fund works best without much debts and home loans. We will speak about debt next.