By the end of this issue, you’ll have a clearer way to think about what your savings are actually for, the numbers I’d want to know before relying on them, and why I care more about how much time my money can buy me than hitting one perfect savings target.

A broken car. A vet bill. The roof falling off.

That was how I thought about emergency savings for a long time. Just money sitting there in case something expensive happened.

Don’t get me wrong, it certainly does that job. One thing I didn’t truly understand as much when I was younger was just how much having money in the bank could change decisions that had nothing to do with an emergency.

I stayed somewhere I hated for years because walking away from a secure paycheck felt too risky.

Eventually, the situation hadn’t changed, but my finances had. Leaving no longer felt financially terrifying.

I stopped asking “Do I have enough for an emergency?” and starting asking “How much time could this money buy me if I needed it?”

One week? One month? Six months? Long enough to turn down a job I didn’t want? Long enough to leave a situation that wasn’t working? Long enough to make a decision without immediately worrying about how I was going to pay rent?

I think this is why the standard advice of “save three to six months” can sometimes miss the whole point. Three to six months may be a useful eventual target, but for the majority of people, that is a huge number to pull out of thin air.

If you currently have $0 saved, getting $500 between you and zero matters tremendously. Then $1,000. Then one month of expenses. Then you keep building.

Every layer gives you a little more room to breathe.

01  What does one month of essential bills cost?

Not what I normally spend, but what do I absolutely have to pay no matter what?

Housing.

Utilities.

Food.

Insurance.

Transport.

Minimum debt payments.

If I normally spend $6,000 a month but could keep the essentials running on $4,000, the latter is the one I care about first.

Until you know what one month costs, it’s difficult to know what your savings can actually do for you.

02  How many months could my accessible cash cover?

I’d take the money I could realistically use if my income stopped and divide it by that monthly essentials number. Not retirement funds, not home equity, but easily accessible funds.

$12,000 available and $4,000 of monthly expenses? That gives me roughly 3 months without a paycheck.

$4,000? That’s one month.

$500? It isn’t a month, but it might stop the next unexpected expense from immediately going onto a credit card with high interest. That still counts.

I’m much more interested in progressively increasing that number than pretending everyone should somehow leap from $0 to a six-month emergency fund overnight.

03  What does my job pay me besides salary?

This is the piece people can forget when they think about walking away from a paycheck. You may also be walking away from a bonus, health insurance, employer retirement contributions, equity, and other benefits.

That’s why I spent so much time this week talking about total compensation.

A $100k salary can potentially be worth more than a $110k salary once you understand what else sits underneath the number.

Salary matters enormously. It just isn’t the whole picture.

04  What is my work actually worth somewhere else?

You might have had a raise recently, but that doesn’t answer this question.

If you earned $70,000 and got a 5% raise, you now earn $73,500. That’s great, but if comparable roles are paying $85,000, you could still be $11,500 behind.

A raise tells you your salary went up. It doesn’t tell you whether it’s competitive.

If I were considering leaving, I’d want some idea of what another company might pay for the work I do now.

05  How much time do I personally want?

There isn’t one perfect answer.

Someone in a role with lots of demand might feel comfortable with three months or less.

Someone with a more specialized career, larger fixed expenses, or family obligations might want six months or a year.

The important part is knowing what would make you feel able to make a decision without immediately needing the next paycheck.

I talk through all five in this Sunday’s video, including how I’d work out whether I could actually afford to leave a job.

ONE IDEA TO KNOW A Bigger Number Is Not Automatically A Better Deal

This came up repeatedly this week.

$10,000 more in salary is not necessarily the same thing as a $10,000 sign-on bonus.

A $110,000 offer is not necessarily better than a $100,000 offer.

A raise does not necessarily mean you’re now being paid market value.

A counteroffer does not necessarily fix the reason you wanted to leave.

Money decisions get much easier once you stop comparing only the headline numbers.

I’d want to know:

What is recurring versus one-off.

What is guaranteed versus target.

What vests later.

What I’m paying for healthcare.

What happens to my time.

What the role gives me next.

The number matters.

So does everything attached to it.

THE ADVANTAGE Decide what you want the extra money to do before it disappears.

One of the easiest things in the world is to absorb a raise.

The paycheck gets a little bigger. Then something gets a little nicer.

Subscriptions, holidays, cars, houses. Nothing dramatic happens, but six months later, that higher income feels completely normal.

I’m not interested in earning more money just so I can never enjoy any of it, but I want some of each increase to make my financial position stronger.

Save some. Invest some.

Pay down something expensive. Increase retirement contributions.

Enjoy some.

The exact split will be different for everyone. I’d just want the higher income to leave something behind besides a more expensive version of my current life.

Some of my favourite videos this week were the Corporate Common Sense ones.

Not because the advice is revolutionary; quite the opposite.

Tell people before you miss the deadline.

If something important was agreed verbally, follow up in writing.

If you don’t know the answer in a meeting, say you don’t know then find out.

Tell your boss about a meaningful mistake before somebody else does.

None of that sound particularly impressive, but it’s what resonated the most with people this week.

It’s also the kind of behaviour that quietly builds trust with those you work with.

I think we sometimes overcomplicate what it means to be good at work. Knowing everything is impossible, never making a mistake is impossible, getting everything done perfectly is impossible.

What people remember is whether they can rely on you.

Do you flag the problem early? Do you tell the truth when you don’t know? Do you close the loop? Do you make the next person’s job easier rather than harder?

A lot of “corporate common sense” is really just learning how your actions affect everybody around you.

That sounds simple.

It is surprisingly rare.

What would having more financial breathing room let you say yes, or no, to?

Hit reply and tell me. I read every response.

Charlotte
Founder, The Redhead Advantage  ·  Build a life you’re proud of.