Module 2 · Lesson 2
Sizing the Protective Reserve
How the framework thinks about reserve sizing, and why the target depends on income volatility rather than a fixed rule of thumb.
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Sizing the Protective Reserve is part of Full Access
How the framework thinks about reserve sizing, and why the target depends on income volatility rather than a fixed rule of thumb.
- What you produce
- Ensure the household balance sheet is resilient before productive assets are accumulated.
Educational material only. Nothing here is investment, tax or legal advice.
Reflection question
If your primary income stopped this week, how many weeks would pass before you had to change something structural?
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How this applies by framework phase
The same material reads differently depending on what your capital needs to do next. You may be in more than one phase at a time.
- Capital Building
- Read this as a question about direction: which surplus, which income stream, and which asset should the next dollar move toward — and what would make that move durable rather than opportunistic?
- Capital Conversion
- Read this as a question about productivity: what is the capital you already own currently doing, what cash flow could it support, and what drag, liquidity or liability constraint has to be handled before it can do more?
- Capital Preservation
- Read this as a question about durability: what could force a sale at the wrong time, how much liquidity keeps that from happening, and how is purchasing power protected without abandoning growth entirely?