Time buffers.

How long could you stay afloat financially, if you were unable to work?

Time buffers


How long could you stay afloat financially, if you were unable to work?

Hopefully you’ve already asked yourself this question, and know the answer, but I won’t bet on it.

It’s surprising how few people have a large safety net of cash set aside.

If your home is robbed, you probably have insurance to cover it. If you’re in a car accident, you probably have insurance to cover that too.

Well, what if you lose your job, are injured, go through dramatic changes in your circumstances and don’t earn income for an extended period of time, or have an unexpectedly large expense–can you cope?

I like to use the term “time buffer” to describe how long I could survive without working a day as what we’re talking about is time. If your living costs are quite low, you won’t need as much to last 6 months as someone with higher living expenses.

Because I hold a portfolio of investment properties, I want to be sure I can cover their costs, plus my living expenses, even if I can no longer perform my job, if interest rates rise, if I need emergency medical treatment or if I decide to simply take an extended break from working.

So, how long would you last if you didn’t earn a cent of income?

Depending on how much risk you’re comfortable with and how many mouths depend on you to feed them, you might be happy with anywhere from 3-12 months of stashed cash. For some, even more. There are varying forms of insurance to cover loss of job and injury which can help, but true comfort comes from taking matters into your own hands.

Don’t think that you literally need to have saved up every dollar of this “time buffer” yourself. Often this safety net can be woven together from multiple materials. Some cash, some equity (in the form of a line of credit or money in offset accounts/redraw against loans), some might even be passive/recurring income streams.

If you haven’t already, work out your monthly living costs then divide this number by how much money you have immediate access to.

This is how long you’ll last. Are you comfortable with it?

Money is time.

– Steven Ryan