tmon

Sales Manager

Personal finance: What’s your safety net/buffer, and why?

I find that many of the most successful sales reps can detach from the outcome - follow Josh Braun on LI if you don't already to learn why.

Here's the problem though:

Its really hard to detach from an outcome if you're living paycheck to paycheck.

Detaching from the outcome gets a lot easier when you have cash to fall back on.

So here's my question:

For those of you who have a cash buffer set aside to cover slumps, how much do you set aside, and why?

Me: 1 year of expenses. Let's me sleep at night knowing I can try new things that may take a while to pay off - and, if I ever want to quit and take a break, I can do that without having to find a new job immediately

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45 comments

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GDO

Politicker

BDM

Well as a Belgian with a way too strong welfare system, I´m not worried. I could live off of well-fare indefinitely until I get kids.

+ I keep a 20k buffer because I´m building a house with my GF and then it could become tricky with the mortgage.

Justatitle

Big Shot

Account Executive

In general the rule is to have 50k put away for a rainy day… it certainly isn’t easy

tmon

Catalyst

Sales Manager

The only easy thing to do is spend it 💸 That’s a great number, tons of flexibility (for most of us, I would hope!) to skate by if needed - hats off to you for keeping the buffer!

Justatitle

Big Shot

Account Executive

Mortgage and 2 kids 50k gives me 3 months buffer lol

tmon

Catalyst

Sales Manager

Yeah I hear ya - 3 months is a hell of a lot better than 0, in any case

Justatitle

Big Shot

Account Executive

True story, and worse case scenario, I can sell my sperm and blood platelets

Stratifyz

Big Shot

Account Executive

I’ve contemplated donating some sperm for the extra dough LMAO! My wife didn’t think it was funny.

Justatitle

Big Shot

Account Executive

Deuce bigalow SAAS Gigalow?!?

Stratifyz

Big Shot

Account Executive

Now that’s a title I could go down in history for.

poweredbycaffeine

WR Lieutenant

☕️

I am rebuilding my 12-month operating expense buffer. Used a big chunk on a down payment for my house, but I'm on the way back. Why? Same reason as you, I can take risks and weather storms if I need to.

tmon

Catalyst

Sales Manager

So much less stress when you have the buffer! Congrats on the house 👌

ChiefGreef45

Catalyst

Account Executive

I'm right there with you. Seeing my buffer going away for my wedding next week. But I know with the new job coming up, we'll get back to that working on the 6-month operating buffer. Might be a good time to work towards a 12-month

mistamor

Opinionated

VP of Sales

33% , 1/3 of my income goes to reserves

JDialz

Politicker

Chief Operating Officer

In cash?

Beans

Big Shot

Enterprise Account Executive

I budget everything off base.

tmon

Catalyst

Sales Manager

Good call! Great way to ensure you're never overextending, and always keeps you living well within your means

NotCreativeEnough

Big Shot

Professional Day Ruiner

same. Life is a lot less stressful knowing your base will keep your lights on and food in your stomach. Then those commission checks are used for investing, paying things off (to make living within base easier), vacations, etc.

JDialz

Politicker

Chief Operating Officer

4-6mo living expenses is all you need in cash. Anything more than that is not being deployed properly into investments.

NotCreativeEnough

Big Shot

Professional Day Ruiner

agreed. I only keep 3 months worth in cash and the rest invested. I'm also single and don't have kids though so I feel comfortable having less cash on hand. If I had a wife, kids, etc I can see wanting to go up to 6 months

goose

Politicker

Sales Executive

Insurance, retirement, college, safety net, investments, expenses...

tmon

Catalyst

Sales Manager

How much of a buffer do you aim for with that safety net? Just curious mate!

goose

Politicker

Sales Executive

In a word, more. I don't think I'll ever have enough so I just keep moving forward. It seems the strategy is always changing. Good month... sock some away. Bad month... make ends meet by any means possible. Everyone has their own shit to deal with. If I was so bold to offer advice (I'm really not) then I'd say live under your means at every step of life.

looper1010

Celebrated Contributor

Solutions Specialist

Safety net (emergency fund) is usually 3-6 months worth of expenses. Now that I share expenses with my partner, we each have 4 months saved up - that's liquid. Another chunk goes into conservative investments meant for emergencies (to earn more than a savings account).

After debt and bills are paid, max out retirement and HSA, anything leftover goes into investments, saving for fun (guilt free spending), and luxuries.

Sgt_Trollingham

Valued Contributor

Business Development Director

Do any of you consider the buffer to be tied up in investments that could be pulled out for a small penalty? I have about 6 months expenses set aside but probably 3-4 years worth of investments (not retirement specific) that could be pulled out with some form of penalty.

I do live in Germany, though, with a solid welfare system should shit hit the fan. Also, worth noting, my expenses are covered by my base salary. I understand that isn't the norm, especially in the US.

tmon

Catalyst

Sales Manager

We have a decent chunk of our non-emergency savings - money for buying our next house, as an example - tied into some CD ladders & other "higher" interest rate investment vehicles, which have a small penalty for early withdrawals, but it's not such a large penalty that we couldn't afford to take the money right away. As long as the penalty isn't so large that it would OFFSET any gains (& give you less $$ than you had before) I'm all for it, personally!

Sgt_Trollingham

Valued Contributor

Business Development Director

Agreed!

HappyGilmore

Politicker

Account Executive

I shoot for a 3 month buffer, however that's easier said than done.

tmon

Catalyst

Sales Manager

It's never easy, nice work making it happen!

slaydie

Big Shot

Account Executive

I always like to keep a 3 month buffer to make sure I have some room in case anything happens. As I advance in my career, I will increase this a bit more.

tmon

Catalyst

Sales Manager

This is important, because as your career advances, the gaps between employment can grow as well. VP's take longer (typically) to find their next role than, say, SDR's/AE's/Managers. 3 months is awesome, regardless! But yes, I'd consider boosting it as you grow professionally as well - great call!

slaydie

Big Shot

Account Executive

Such a good point! It's only go to take longer to find your next gig as you climb up the later!

steakalldayerryday

Opinionated

My wife and I keep $15K in cash each. I also have investments in a taxable brokerage account that are essentially liquid, but we don’t plan to dip into that or into either of our retirement accounts unless there’s a mini disaster for some reason and we blow through $30K.

stockbroker

Good Citizen

Investment Advisor

Liquid Cash is king for short term needs. But as a finance guy at some point we ask….how much is too much in cash? By that I mean at what point is the 3,6 or 12 months of cash savings losing money to things like inflation or opportunity cost. We like having the 6 months in savings but beyond that lets look at making more than 0.02% at the bank.. the opportunities from there is where the fun begins.

tmon

Catalyst

Sales Manager

Super important. Can't let panic keep you in cash when interest rates are at zero! I keep 12 months because it lets me sleep at night, but I lose just as much sleep having too much sitting in cash as well. Gotta find that balance!

JDialz

Politicker

Chief Operating Officer

And when you're more established, start looking at non-market-correlated assets.

LordOfWar

Tycoon

Blow it up

So far I have 6 months of expenses in a high-interest, tax-free savings account. I'm aiming for 1-1.5 years of expenses saved. We just bought a house, so that cleaned us out.

tmon

Catalyst

Sales Manager

It's a good problem to have! Congrats on the house, I'm sure you'll catch back up in no time

LordOfWar

Tycoon

Blow it up

Thanks! Working hard to get ahead.

homeschooled

Opinionated

Executive Client Partner

The ability to walk away from any job and be ok for at least a year was goal number one and I set $100k as target (based off expenses and what I know we could get by on, we have three kids with a fourth on the way). That $100k is liquid, earning a lot less interest than I’d like but right now it is psychologically valuable to know I could leave my job at any time. Once we saved that much, the next goal was to build up a secondary pool of money for starting a company or investing in other revenue producing assets (like Realestate, we own two rental properties right now).

tmon

Catalyst

Sales Manager

It's a lot of $$, but it's so worth it if it lets you sleep well at night, keeps your family secure, and lets you STAY in your other investments when times get tough. That last piece is so underrated. If you didn't have that $100k, I imagine you'd find it really hard to actually invest in other assets like Real Estate. Great job!!

SiliconBBQ

Politicker

The Metal Rooster

have ~9 months savings in cash set aside. probs more but re-allocating currently. too much cash on hand costs future flow due to TMV so may draw all the way down to ~6 months. but that's a minimum.

seen too many people get long-donged by economy, flashbacks to '07-'08 and what happened recently with covid, general restructuring, and just bad luck with boss/timing/name the factor outside their control.

in general i live and provide for my family off of my base salary. commission is gravy and 2nd/3rd trip to the buffet line on top.

also building capital for real estate investment properties to drive residual cash flow.

Stratifyz

Big Shot

Account Executive

90 day run rate - if I can’t bounce back in 90 days then I’m royally fucked.

CanIOfferYouANiceEgg

Account Executive

I keep 6 months of mortgage...

POWERDIALER

Opinionated

VP of Business Development

6 months your monthly bills (house, food, etc.) is a general rule. If you have a family and kids I’d push for 9-12 months.

NotCreativeEnough

Big Shot

Professional Day Ruiner

3 months expenses as cash on hand in savings for emergencies
5% of each paycheck into my 401k (company doesn't match but I want retirement money I can't do dumb stuff with instead of save)
10% from each paycheck into my vanguard brokerage account to automatically invest in index/mutual funds - keeps the money invested but still easily accessible if need be
The rest that isn't spent on bills and life goes into my general savings account for vacations, buying pointless shit, extra cushion, other investments outside of my automatic ones, etc.

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tmon

Personal finance: What’s your safety net/buffer, and why?

45 comments

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