Money set aside for interruption.
WHY IT MATTERS MORE FOR BUSINESS OWNERS
Income is variable, and there is no sick pay or redundancy payment.
WHAT IT PROTECTS AGAINST
A quiet period Illness A customer failing to pay An unexpected personal cost
WHAT IT ALSO PROTECTS
Your judgement.
WHY
Decisions made from desperation are worse: accepting bad customers, poor terms, work below cost.
HOW MUCH
Enough months of committed costs that a bad period is an inconvenience.
WHAT COMMITTED COSTS MEANS
Housing, food, transport, school fees, obligations you cannot pause.
WHAT NOT TO INCLUDE
Discretionary spending.
WHY
You would reduce it, and including it overstates the requirement.
WHERE TO KEEP IT
Somewhere accessible quickly, and separate from daily accounts.
WHY SEPARATE
Money in the current account is spent.
WHAT NOT TO DO
Invest it in anything that can fall in value or take time to access.
WHY
Emergencies do not wait for favourable conditions.
HOW TO BUILD IT
Treat it as a fixed cost from every payment.
WHY FIXED
Saving whatever remains produces nothing.
WHAT TO DO WHEN YOU USE IT
Rebuild it deliberately.
WHAT TO KEEP SEPARATE FROM IT
Business reserves.
WHY
They serve different purposes and should not be confused.
