What are your dreams?
Do you envision traveling the world? Starting a business? Spending more time with your family?
No matter what your goals are, most require money. You need cash to buy plane tickets, seed capital to build a company, and resources to have unforgettable experiences with your loved ones.
All of your dreams are attainable. They just require that you have a sufficient cash runway so you can start working towards them!
This term is common in the startup community. It measures the amount of time a new company can survive before it has to raise money or file bankruptcy.
In personal finance, a cash runway is similar. It shows how long you can sustain your lifestyle without having to work.
For example, imagine you have $30,000 in your savings account. If you spend $3,000 per month, you’d have a cash runway of 10 months.
But, what if you lived like a tightwad and spent less money? If you lowered your expenses to $2,000, you’d be able to survive for 15 months. Thus, giving you 5 extra months of your most precious resource, time. Time that you could use to focus on fulfilling your dreams!
A Gallup Poll found that only 15% of the world’s labor force is engaged at their job. This leaves a staggering 85% that’s not!
In the US, the numbers aren’t that much better. Gallup reports that 30% of Americans are immersed in their work, while 70% are not!
Most people spend the majority of their day at a job that they aren’t passionate about. Yet, one they need so they can pay bills and survive. These people are handcuffed and stuck in a situation that limits their future possibilities.
But you don’t have to live this way. It can all be different!
Building a cash runway is the first step towards creating change. It gives you the time and money to pursue the things you want most out of life!
Dream of visiting every country in the world? A cash runway makes it possible!
Want to start a business? Cash runways give you the opportunity!
Crave more family time? A cash runway rewards you with it!
A cash runway is your first taste of independence. It gives you some degree of financial freedom to go out and spend time however you choose!
But don’t get confused, a cash runway is not an emergency fund. It’s an entirely separate account. No matter what you choose to pursue, life will always be there to surprise you and you’ll need extra resources to pay for those unexpected expenses.
In some cases, you may need multiple cash runways, too. It could be necessary to have one for your personal spending and another to fund your dreams.
For example, imagine you want to start a business. You determine that it will cost $3,000 per month to get up and running. But, most businesses don’t make much money at first. So, you’ll need two cash runways. You’d have one to pay for your business expenses until it’s profitable and another to cover your needs and wants until that time comes.
A cash runway gives you a certain amount of time to chase your dreams. Then, as it begins to run out, you’ll have to find ways to extend it.
The way you manage money determines the amount of freedom you’ll create. By pushing your burn rate lower, your savings ratio grows which gives you more time to pursue your passions!
People that live above their means spend more than they earn. Because of this, it’s impossible for them to save and pursue their financial goals.
By default, when you spend less than you make you’ll save. You’ll produce a surplus which extends your cash runway and opens up the doors to more life choices!
A cash runway puts you on the path towards your dreams. It proves that if you continue budgeting, saving, and investing then you’ll escape the rat race. This gives you the opportunity to live on your terms and find greater fulfillment in life!
How big of a cash runway do you need to pursue your dreams? Comment below.
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