Usable opening cash
A₀ = accessible cash − protected cashThe protected amount stays outside the primary scenario.
Savings Runway · Methodology
How the calculation works
Estimate when accessible cash would first be unable to meet a modelled temporary income disruption.
Return to calculatorIncluded
- Accessible cash after a protected amount
- Reliable after-tax income
- Essential and flexible spending
- A user-defined unexpected expense
- A cash-balance path of up to 10 years
Outside this method
- Credit limits, pensions and home equity
- Benefit eligibility and tax calculations
- Cash interest and inflation
- Exact payday and bill timing
- Judgements about how much emergency cash is enough
Calculation
Core formulas
Monthly balance
Bₘ = Bₘ₋₁ + income − spending + eventsThe first negative balance ends the runway, even if a later receipt restores it.
Constant-flow runway
Runway = A₀ ÷ (spending − income)This shortcut applies only when spending exceeds income and no dated event changes the path.
Timing convention
When cash flows occur
Monthly income and spending are spread evenly. The interactive calculator applies a named unexpected expense in the selected month and stops the primary runway at the first shortfall.
Limitations
What the result cannot establish
- Essential spending is the user’s classification.
- Monthly smoothing may miss short timing gaps.
- Inflation and cash interest matter increasingly in longer scenarios and are omitted.
- The 10-year cap still makes the method unsuitable for retirement planning.
- Future income and costs may differ from the entries.
Reference tests
Numerical checks
| Case | Inputs | Expected result |
|---|---|---|
| Constant deficit | £12,000 cash; £1,000 income; £3,000 spending | £2,000 monthly deficit; 6 full months |
| Income exceeds spending | £10,000 cash; £2,000 protected; £3,000 income; £2,500 spending | No shortfall in 10 years |
Evidence