Financial Runway
The number of months you could sustain your current lifestyle using only savings and liquid assets.
Financial runway measures how many months you could maintain your current lifestyle if you lost all income sources. It's a critical metric for career decisions, entrepreneurship, and financial security. Unlike emergency funds measured in dollars, runway contextualizes savings against your actual expenses.
Calculating Your Runway
Financial runway = (Liquid savings + Accessible investments) ÷ Monthly expenses. Only include assets you could access within 30 days without significant penalties. Monthly expenses should reflect your actual spending, not a theoretical budget.
Why Runway Matters More Than Savings
Having $50,000 in savings sounds impressive, but if you spend $10,000/month, that's only 5 months of runway. Conversely, $20,000 with $2,000/month expenses gives you 10 months. Runway normalizes savings across different income and expense levels.
Runway for Different Life Stages
Entry-level professionals might target 3 months of runway. Mid-career with dependents should aim for 6-12 months. Those considering entrepreneurship or career changes often need 12-24 months. Near retirement, your runway should be measured in years.
Using Runway for Career Decisions
Knowing your runway empowers bold career moves. Considering a job change? Your runway determines how selective you can be. Starting a business? Your runway is your timeline to profitability. Facing layoffs? Your runway is your breathing room.
Examples
Career Changer Profile
Sarah has $30,000 saved and spends $4,000/month. Her 7.5-month runway gives her time to job search selectively rather than taking the first offer.
Entrepreneur Profile
Marcus saved $60,000 and reduced expenses to $3,000/month (20 months runway) before launching his startup, giving him nearly two years to achieve profitability.
Key Takeaways
- 1Track actual expenses for 3 months before calculating runway
- 2Consider your 'emergency' expense level, not current lifestyle
- 3Build runway before making major career changes
- 4Reassess runway quarterly as both savings and expenses change
Related Topics
Ready to Master Your Finances?
CareerPhases combines career intelligence with financial planning to help you build wealth faster.