You will build a sheet that shows how many months you could cover if your income stopped today.
If your salary stopped arriving next month, how long could you keep paying your bills? Most people answer with a guess, and the guess is usually generous. They count money that is locked in investments or CPF, forget a bill that comes once a quarter, or assume they would cut spending faster than they actually would.
A runway is the honest version of that answer: the number of months your accessible cash would cover your costs if your income stopped today. This exercise builds a sheet that works it out, with and without cuts, and compares it with the buffer target you set in lesson 5.3. Jasmine's sheet is the worked example, with made-up figures.
Open a new sheet. In the first block, list every pot of money you could get into your hands within about a week without selling anything at a loss: savings accounts, current accounts, and cash in a multi-currency or e-wallet account if you hold any.
Leave out three kinds of money. Investments, including shares, unit trusts and robo-advised portfolios, because their value may be down just when you need them, as lesson 4.3, What actually changes for households in a recession, explained. CPF, because you cannot withdraw it for living costs while you are of working age. And fixed deposits or T-bills that do not mature soon. Breaking a fixed deposit early usually means giving up interest, and a T-bill pays out only at maturity. List these separately with their maturity dates, so you can see when they would become available.
Jasmine's cash block: S$12,500 in her main savings account and S$2,500 in a second account, a total of S$15,000. Her S$20,000 in investments and her CPF balances are noted below the block but not counted.
In the second block, list your monthly spending in two groups.
Essential costs come first, the same fixed costs you worked out in lesson 5.3: housing, loan instalments, insurance, support for dependants, utilities, and basic food and transport. Add a monthly amount for bills that arrive once or twice a year, such as an annual insurance premium, divided by twelve.
Then list optional costs in the order you would cut them, with the easiest cut at the top. Your recession playbook from lesson 4.5, Write your recession playbook, already has this order; copy it across.
Jasmine's essential costs are S$3,300 a month. Her optional costs, in cutting order, are eating out S$500, her holiday fund S$400, shopping S$300, the gym S$200 and subscriptions S$100. That is S$1,500 of optional spending, so her total monthly spending today is S$4,800.
Runway is cash divided by monthly costs. Work it out twice.
Without cuts, divide your cash by your total monthly spending. For Jasmine, S$15,000 divided by S$4,800 is about 3.1 months.
With all the cuts made, divide your cash by your essential costs alone. For Jasmine, S$15,000 divided by S$3,300 is about 4.5 months.
It can be useful to add a middle line for the first cuts only. If Jasmine cut eating out and the holiday fund straight away, her spending would be S$3,900 and her runway about 3.8 months.
The gap between the lines shows how much the cuts are worth. It also shows something uncomfortable: the cuts help, but they rarely double your runway. Most of the cover has to come from the cash itself.
In lesson 5.3, Jasmine set a target of seven months of essential costs, which is S$23,100. Her cash is S$15,000. The gap is S$8,100.
Decide how quickly you want to close it, then divide: over 18 months Jasmine needs to set aside S$450 a month, and over 12 months it would be S$675. She chose 18 months, because S$450 fitted inside her current surplus without cutting anything she valued, and she found the money partly by redirecting her holiday fund for a year.
The last step is the one that makes it happen: a standing transfer from the account your salary lands in, on the day after payday, into the account that holds the buffer. Lesson 2.3 of The Singapore personal finance system, Automate payday so saving happens first, covers why the timing matters.
One screen with three blocks. The cash block shows each accessible pot and the total, with investments, CPF and locked deposits listed below it with their dates. The cost block shows essential costs and ranked optional costs with their monthly amounts. The results block shows runway without cuts, with first cuts and with all cuts, your target in months and dollars, the gap, and the monthly amount and date of the standing transfer that closes it.
Jasmine's sheet now tells her something exact: about three months without changes, four and a half with every cut, and a plan to reach seven within a year and a half. Pull up your account balances and last few months of spending, and build your own version.
Complete the runway sheet, write your current runway in months, and set up a standing transfer if it falls short of your target.
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