What is a Survivor's Fund and Why You Need One

Capital Budget Strategies, LLC, Austin’s best Financial Coach, helps clients get their finances organized. Together, we determine Net Worth, set up savings for Long-Term expenses (like real estate taxes, holiday gifts or your next vehicle), set up an Emergency Fund and, finally, create a Survivor’s Fund.

Survivor’s Fund? Like the TV show?

You many know an Emergency Fund is an account of around $1,500 for use only in emergencies. An Emergency is a job layoff, broken HVAC, a fender bender or medical bills, all unexpected expenses. Expected expenses like birthday gifts, vacations and a prom dress are not emergencies, as you know they are coming and can therefore save for them.

A Survivor’s Fund is cash you use to survive for 3-months of reduced or no income. For instance, if you work for a law firm and the firm loses its largest client, you might get laid off. You would then have your Survivor’s Find to “survive” until your next job.

To begin, our Austin Money Coach notes the difference between “nondiscretionary” (mandatory) and “discretionary” (optional) expenses. If you lost your job, you would, hopefully, cancel or suspend your discretionary expenses to save money. No more personal trainer, Washington Post home delivery, concerts or that trip with your cousin to visit craft breweries in Brooklyn.

Our Austin Financial Coach suggests 3 Steps in building a Survivor Fund:

Step 1: Write down your monthly mandatory expenses: Rent or mortgage, utilities, food, car loan, school loan, credit card payments, transportation, etc.

Step 2: Add up the monthly total from Step 1.

Step 3: Multiply your total by 3.

The result is the target amount for your Survivor Fund.

You will not build a Survivor Fund in one or two months; it may take several. But you will do it eventually. Keep the money in an online high interest savings account so you can gain easy access when needed.

The good news: if you never need the funds from your Survivor Fund, then when you retire you will have a large bucket of cash to finally head to Brooklyn!