108: Why It’s Important to Know Your Numbers

Do you know your numbers?

We’re not talking about your numbers like how much you have in your checking account, or age and weight (which we shouldn’t be asking about anyway!). By “numbers,” we mean the three numbers that can help you ride out this COVID-19 crisis… or any big unexpected life change that comes your way.

We’re talking about:

1. How much money you really need to make
2. Your emergency fund number
3. Your BULB threshold

In our latest Wealth by Design episode, we talk about calculating those three numbers and how you can actually reach them.

WHAT YOU’LL LEARN

• [00:31] Why you need to “know your numbers”
• [03:45] The questions we’re all asking ourselves right now
• [06:09] How you know you’re financially secure  
• [06:58] Getting your finances (and mindset) in order 
• [10:04] What is your income need?
• [10:53] How to calculate your true income need number
• [11:35] Calculating your emergency fund number and BULB number
• [12:51] A quick note about reaching BULB status
• [14:35] How to get to those three numbers
• [17:07] Some resources and exciting news

Calculating your income need and emergency fund

What’s your true income need? As in… how much income do you need? To find that first number, look at an average month from the past six months. Look at your expenses; see what you spent on your mortgage or rent, groceries, utilities, and so on. 

Use your favorite budgeting app or tool (or good ol’ paper and pen!) to calculate what you spent on your needs. Not your wants, but your needs. Everyone is different and we’re not about judging other people’s lifestyles, but see what extra expenses you can actually live without, like ordering takeout or shopping online. 

Now that you have your income need number, you can figure out how much to set aside in your emergency fund. 

Example: Let’s say your income need was $4,000. Your emergency fund should be, at minimum, 3 to 6 times that number. So, you should have $12,000 to $24,000 set aside in an easily accessible account. 

Working toward BULB status

We won’t go too much into detail about BULB here, but as a quick refresher,