Set Aside Enough Money

Dear Dave,

How much money should I have in my business emergency fund? My annual sales are about $100,000, and I currently have a couple of months of general and administrative expenses set aside.

Anonymous

Dear Anonymous,

You're getting there! I like the idea of a small business having about six months of expenses set aside. Having that kind of cushion provides a ton of options, and lots of peace. It also eliminates the need for borrowing money, because with that kind of cash sitting around, you basically become your own line of credit!

Having a personal emergency fund set aside is a little different than having one in place for your business. When it comes to personal finance, I usually recommend setting aside three to six months of expenses. But the basic idea is the same, regardless of whether you're talking about personal finance or the financial health of your small business. A fully funded emergency fund can turn a disaster into nothing more than a minor inconvenience!

- Dave

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