How much cash should you leave in your business and how much should you take out?
The generally accepted wisdom is three months worth of costs. I don’t know the source of this figure but this seems about right. If all your income stopped overnight you would have three months to make plans.
In reality, unless there is a global pandemic, it’s unlikely that your income would all stop at the same time so you’d probably have longer to find funding, start a new income source, or to ride out a temporary blip. Most income protection insurances take 3-6 months to kick in.
We should also have a similar amount easily accessible to cover our household bills.
The last eighteen months have been tough but we need to rebuild our reserves ready for the future.
How long would your reserves last you?