The idea’s the same

Dear Dave,

I own a small business. How much should I have in a business emergency fund when my annual sales are around $100,000? Currently, I have two months of expenses set aside.

Theresa

Dear Theresa,

Generally, I like the idea of small businesses having about six months of expenses on hand. That kind of cushion usually eliminates the need for borrowing money. It also provides peace of mind. And if you’ve been an entrepreneur very long, you know that’s an invaluable thing.

Having a personal emergency fund set aside is a little different than having one in place for your business. When it comes to personal finance, I recommend having three to six months of expenses set aside. The basic idea is the same, though. A fully-funded emergency fund gives you an option—besides debt—when unexpected things happen!

— Dave