Runway

If you have 400X today, then you are financially free today. Go do things that you love and retire from money. But that is not the case with most of us. Either our monthly commitments are too high in the name of lifestyle or we just don’t have a sense of what is coming in & what is going out and what we have. So we need to know how long we last with what we have today.

A runway is the length of time you last with what you have. So here is a simple formulae to calculate your financial runway. The necessary numbers you must have ready are

• your average monthly expense as “m”. (your average spend every month to keep you alive and kicking)

• your passive income as “p” (not the active income, that which you are earning today by showing up to work but a passive one that which come in even if you don’t go to work today)

• your liquid assets as “x”. (if you sell every asset you have and convert into cash what would that be)

Calculate your burn rate “b” (the amount of money needed to run a month)

b=m-p

now runway = liquid assets/burn rate

Let’s take an example

let us say that your monthly expense, m = 30,000 INR, your passive income is 10,000 INR and so your burn rate is 30-10K is 20,000 INR.
Let us assume you have 500,000INR as liquid assets.
So your runway is 5 Lacs/20K = 25 months.

So for about 2 years, you are taken care provided life was normal and no emergency hit you. If this runway is less than 6 months, you should be concerned about your financial situation.

Imagine if 5L was 50L your run way is 250 months and that is about 20 years. The more your runway is better you feel. We try and make it 1200 months and that 100 years. Your 400x is the minimum (33 years) and more than that is fabulous. Go check your runway and see where you stand.

🥂to runway!