How much cash buffer do you like to have against debt?

I have recently topped up some loans and have placed all existing cash in offset.

I've never had this amount of money in cash as Ive always had redraw loans and wouldn't touch it. It's strange having this sort of money sitting there and it's not hard to want to spend! Even though I won't as I'm very careful with money, the temptation is there.

Which brings me to the question of how much buffer do you have?

For 1m debt what cash buffer do you have in percentage? 1%, 5%, 10% etc

 

Hope you read this first
Tax Tip 1: Parking borrowed money in an offset account Tax Tip 1: Parking borrowed money in an offset account

Generally 6 months of repayments is a good buffer to have available in cash.

 

Currently about 5%

 

Depends on your insurance levels, current debt profile, future personal plans, etc.

One that people may not be aware of and find difficult over time is extending I/O terms for those with debt levels that were obtained pre APRA but won't be able to service post APRA. If you bought quickly in a short time period, this may be of more concern as it may be multiple properties going to P/I at the same time.

 

Personally i would say enough cash for min " 12 month of unemployment ".

But it also comes down to what support level you have from family, debt level, risk exposure, where you invested ( Property and shares), are you self employed, how many dependents and age.

No simple answer...The older you get the more safety "cash " you need....for health and unexpected events.

 

I work on "time to survive with no income" rather than any other metric.

There was a decent bit of discussion on "time buffers" here: Time buffers.

 

Everyone is different, the answer I give is 'Whatever amount helps you sleep at night.'

For some it's half a year's worth of interest or more, others could be as little as a few grand. Everyone has different risk profiles, comfort levels etc, find an amount that works for you and run with it.

Cheers,
Michael