Week 27 Day 3 Action Items

Day 3

• [ ] Familiarize yourself with the purpose and significance of an emergency fund.
• [ ] Identify the optimal size and structure for an emergency fund suitable for your business.

Review & Assess

To begin, start with reviewing what you currently have in place. How much of an emergency fund do you currently have set aside? Next determine the amount of cash needed to cover needed expenses, payroll, loan payments, etc. Multiply that number by the desired number of months (either 3, 4, 5, or 6 months for example). That is your goal number.

• Example: Let’s say you have $5,000 in an emergency fund right now. Next you determine your operating costs just to cover all basic costs are $20,000 per month. This is what the math would look like for your goal amount:
  • Emergency fund goal amount (3 months of expenses)= $20,000 * 3 months = $60,000
  • Goal minus your current fund balance= $60,000 - 5,000 = $55,000
  • The amount you need to save to reach your goal is $55,000.

Do the Math

Create a list of basic operating costs that you must pay monthly. List the name and amount each month. On Day 5 we will determine a plan to save for your emergency fund.

• Operating Cost 1
• Operating Cost 2
• Operating Cost 3
• Operating Cost 4
• Operating Cost 5