Section 2: Building Your Financial Foundation
This is IMPORTANT MONEY! This will be your financial shield.
This money is NOT used to make you wealthy, but to give you peace of mind. It will be your financial shield against life’s emergencies. Like insurance, you hope you never need it, but if an emergency arises, you’ll be glad it’s there.
Consider high-yield savings or money market accounts for your emergency fund. While some suggest investing it, treating it like a ‘break the piggy bank’ scenario, be cautious of delayed access or market risks, such as market downturns. Diversifying across different accounts and banks is also recommended, but choose what’s best for your risk tolerance.
How much is right for you?
First, calculate your monthly expenses, then read the suggestions below. How many months’ worth of expenses should you have saved for your emergency fund?
3 months – Employed in a high-demand field.
If you feel you can replace your income more easily/quickly if needed, and/or if you don’t have a lot of responsibilities that require your income.
3-6 months – Employed in a more specialized position.
If you feel it could take longer to replace the income you’re used to, or if you have more responsibilities, such as dependents relying on your income.
6-12 months – Seasonal/Freelance/Self-Employed
If you have irregular income, such as project-based work, seasonal contracts, or client-dependent earnings, a larger reserve helps smooth out the gaps between paychecks. This cushion allows you to cover personal expenses during slower months, pivot between gigs without panic, and maintain stability even when invoices are delayed or opportunities shift. It also gives you breathing room to make strategic decisions rather than reactive ones.
9-18 months – Business Owner
If your income is tied to the performance of your business, which may fluctuate due to market conditions, client demand, or operational disruptions. A larger reserve provides a buffer for payroll, overhead, and personal expenses during slow seasons, transitions, or unexpected setbacks, especially if your business supports others.
18-36 months – Anyone Nearing Retirement
Useful when nearing retirement to bridge the gap until your retirement funds begin, and can help serve as a buffer against market downturns, reducing losses if you retire when the market is down.
These are only suggestions. Refer back to the S.W.A.N. method to help you decide the best amount for your Fully Funded Emergency Reserve.
Use the worksheets below to track your Fully Funded Emergency Reserve. Attach it to your Annual Financial Checkup workbook for future reference.
Downloadable Worksheets
EMPLOYER MATH Worksheet
This worksheet is also included in the Annual Financial Checkup Section 2 bundle.
Section 2 Annual Financial Checkup bundle.
This bundle includes all the worksheets for Section 2, including the EMPLOYER MATCH worksheet, in a single, easy-to-use PDF download.