Your runway is how many months you could keep paying all required expenses if your income stopped today. Divide the money you can reach quickly — cash first, then liquid investments after taxes and a possible drop — by your monthly outflow: housing, debt payments, insurance, food, transport and other essentials. Count cash-only runway separately. Three to six months is a common target; people with irregular income or dependents usually need more.
The formula
Runway (months) = money you can reach ÷ required monthly outflow.
Calculate it twice:
- Cash runway: checking, savings and money market accounts only. This money is there on day one.
- Liquid runway: cash plus investments you could sell within days, counted after estimated taxes and a margin for a market drop. This is your second line of defense.
What goes into monthly outflow
Use what you must pay, not what you would like to spend:
- Rent or mortgage, property taxes and insurance
- Minimum payments on every loan and card
- Utilities, phone, internet
- Food and household basics
- Transport, health insurance and medicine
- Childcare, support payments and other obligations
Subscriptions, travel and eating out are the first things you would cut — leave them out of the required number, but know what they cost.
A worked example
A household with $18,000 in savings, a $65,000 brokerage account and required outflow of $6,200 a month:
| Amount | Months | |
|---|---|---|
| Cash runway | $18,000 | 2.9 |
| Investments after a 15% margin for taxes and a drop | $55,250 | 8.9 |
| Liquid runway | $73,250 | 11.8 |
On paper the family has almost a year. In cash, it has less than three months — and if the market falls at the same time as income, the investments may need to be sold at the worst moment.
Runway buys you time to make a good decision instead of a forced one.
How many months you need
A common rule of thumb is three to six months of required expenses in cash. Aim higher if:
- your income is irregular: freelance, commission, a business;
- one income supports the household;
- you have dependents or health risks;
- your industry takes longer to rehire.
You can hold less if the household has two stable incomes and good insurance. In the Federal Reserve's survey of 2025, published in May 2026, about 55% of US adults said they had savings to cover three months of expenses.
How to extend your runway
- Lower required outflow. A cheaper fixed cost extends runway every month, forever.
- Build cash automatically. A fixed transfer on payday works better than saving what is left.
- Keep the cushion where it earns something. A high-yield savings or money market account keeps it reachable.
- Know your second line. Which investments would you sell first, and what would the taxes be?
- Avoid relying on credit. An available credit line is not runway; it is a future payment.
Common mistakes
- Dividing by income instead of outflow. Runway measures what goes out.
- Counting home equity or retirement accounts. They are slow or costly to reach.
- Using today's portfolio value. Stress-test it with a 20–30% drop.
- Forgetting irregular bills. Annual insurance, taxes and repairs belong in the monthly average.
- Never recalculating. A new loan, a child or a move changes the number.
How to do it in AOS
When to recalculate
Recalculate every quarter and after any change in income, housing, debt or family. If runway drops below your target, refill cash before taking on new commitments.
FAQ
Is runway the same as an emergency fund?
The emergency fund is the cash you set aside; runway is how long it lasts. Two people with the same fund can have very different runway if their expenses differ.
Should I include unemployment benefits?
You can add expected benefits to "covered by income", but be conservative: they may be delayed, taxed or lower than you think.
Where should I keep the cash?
Somewhere safe, insured and reachable within a day or two — typically a high-yield savings or money market account, not the stock market.
How do I count investments?
At a discount. Subtract estimated taxes on gains and assume a meaningful drop, because the moment you need them is often a bad moment for markets.
What if my runway is under one month?
Start with a small, automatic transfer and cut one fixed cost. Even one month of cash changes how you handle the next surprise.
Sources
This article is for information only and is not investment, tax or legal advice. Figures are given with their source and date.
