Your personal liquidity plan

Every earlier chapter feeds one blank in the template below. You can fill the blanks in order, and every number comes from a formula you can rerun.

Which of these are you?

• You have a lump of cash and no structure. Start with Step 1 to size the tiers, then Step 2 to schedule the dated goals.
• You already have an emergency fund and a few CDs. Jump to the template and fill in the account and insurance columns. The gaps usually show up there.
• You are close to or over $250,000 at one bank. Go straight to Step 3 and the insurance line of the template.
• Your cash is mostly in a fintech app. Complete the "Bank and account" column with the named partner bank, using the checks in the safety chapter.

Step 1: size the three tiers

Tier 1 is one month of essential expenses. Tier 2 is your reserve, commonly three to six months of essentials. Tier 3 is the sum of dated goals due 181 to 720 days from now, and a goal due within 180 days is funded from Tier 2 vehicles. Required cash is the total of the three, and anything left over is a decision for you to make, not a target to hit.

Worked example, all figures hypothetical.

Formulas: Tier 1 = monthly essentials; Tier 2 = monthly essentials x reserve months; Tier 3 = sum of goals due 181 to 720 days out (goals due within 180 days are funded from Tier 2 vehicles); required cash = Tier 1 + Tier 2 + Tier 3; surplus = total cash − required cash.

Goal C is not counted, because it is due after 720 days. It enters Tier 3 when it is 720 days away, which is 900 − 720 = 180 days from now, and required cash then rises by $20,000. The plan should say so in writing, so the surplus is not spent before then.

Now the opposite case: not enough cash. Suppose total cash is $40,000 and Goal C does not exist. Required cash is still $50,000, so surplus is 40,000 − 50,000 = −$10,000. Tiers fill in order: Tier 1 gets $4,000, Tier 2 gets $24,000, and the remaining $12,000 goes to Tier 3, leaving Tier 3 short by 22,000 − 12,000 = $10,000. The shortfall belongs to the dated goals, so the fix is to change a goal's date or amount, not to thin the reserve.

Choosing your reserve months

The reserve is a judgement about how long it could take to replace income, and the framework's common range is three to six months of essentials. The choice moves the number a lot. At $4,000 of monthly essentials, three months is 4,000 x 3 = $12,000 and six months is 4,000 x 6 = $24,000, a $12,000 difference. Reasons to sit toward the top of the range include a single income, variable pay, dependents, or a job market where replacement takes long. Reasons to sit lower include two stable incomes, a second source of liquidity you trust, or very predictable expenses. Write down the reason next to the number, so the reserve is a decision you can defend and revisit rather than a default.

What the surplus is for

A surplus is not an instruction to spend or to invest. In the worked example the $20,000 has three uses, and the plan should name the one you pick. You can raise the reserve, since two more months of essentials is 4,000 x 2 = $8,000 and leaves 20,000 − 8,000 = $12,000. You can hold it for Goal C, which enters the 720-day window in 180 days. Or you can move it out of the cash tiers entirely, which is a decision for the rest of your financial plan and outside this framework. Whichever you choose, write the date you will decide by.

The calculator takes goal dates in months and converts them at 30.4 days per month. Enter Goal A as 10 months and Goal B as 20 months, which it reads as 304 and 608 days. That lands in the same tiers and reproduces the table above.

Step 2: fund each Tier 3 goal backward from its date

Tier 3 money has known dates, so build backward from each date. Buy a CD that matures about a week before the goal, so the cash is in hand and a maturity landing on the due date cannot strand you. The principal you need is the amount due divided by (1 + APY) raised to the years the CD is held, where years held = days to maturity / 365.

Worked example, hypothetical rates. Goal A is $11,000 due in 300 days, so its CD matures at day 293. Goal B is $11,000 due in 600 days, so its CD matures at day 593. Illustrative APYs are 4.10% for the shorter CD and 4.30% for the longer one. Annual compounding, taxes excluded.

Total principal is 10,650.85 + 10,272.76 = $20,923.61 against $22,000 of goals, so the CDs' interest closes the gap: 349.15 + 727.24 = $1,076.39, which equals 22,000 - 20,923.61. Goal A's CD earns 11,000 - 10,650.85 = $349.15 and Goal B's earns 11,000 - 10,272.76 = $727.24.

Banks sell fixed terms, and not every bank offers odd-day terms. If none fits, choose the longest available term that matures before the goal and hold the cash in a Tier 2 vehicle until the due date. Check each bank's minimum deposit against the principal you need.

A ladder with equal spacing solves a different problem: money whose date is unknown but recurring, where you want a maturity arriving on a schedule. The first 24 months of a ladder are Tier 3 money, and rungs longer than 24 months sit outside the cash tiers. For N equal rungs spaced s months apart, average remaining maturity is s x (N + 1) / 2 months. The calculator below is shown for mechanics, not for goal funding.

More maturities give you smoother cash flow and cost you administration. Each CD is its own account with its own minimum deposit, maturity date, grace period and renewal terms, so every one adds a date to track and a decision to make.

For today's real rates on the terms you need, read the actual quotes before you buy. The best CD APY we track is 4.50%%, and your own mix of terms will differ. Replace the illustrative APYs with the quotes you are offered.

Step 3: decide where each tier sits

Each tier has a job, and the vehicle should match it. Tier 1 needs same-day access, so checking or a savings account. Tier 2 needs quick access and stability, so savings, a money market account, or Treasury bills. Tier 3 has dates, so CDs or Treasury bills that mature just before those dates, or a ladder if the dates recur.

Then run the insurance check. The FDIC standard maximum is $250,000 per depositor, per insured bank, for each ownership category. Add up every balance that shares a bank and a category, and compare the total with the limit. If the money sits in a fintech app, record the named partner bank, and remember that pass-through coverage depends on records that identify you and your share.

Here is the worked plan mapped to accounts, all hypothetical. Tier 1's $4,000 sits in checking at Bank A. Tier 2's $24,000 sits in a savings account at Bank B. Tier 3's two CDs sit at Bank C, funded with $20,923.61 of principal. Each bank holds one single-owner balance well under the limit, so the exposure at every bank is $0. If the same household instead kept all of it at Bank A in one single-owner category, the total of $48,923.61 would still be under $250,000 and still fully insured. The reason to spread across banks is not this arithmetic. It is that a freeze, an outage or a dispute at one institution should not block every tier at once, so keep Tier 1 somewhere separate from the bank that holds your CDs.

If a different vehicle helps, Treasury bills versus CDs and state tax on Treasury interest cover the yield and tax tradeoffs, since taxes can change which vehicle earns more after tax.

Step 4: write the rules for moving money

A plan that does not say when to move money gets ignored the first time something changes. Write each rule as a trigger, an action and a limit, so you decide once and not under stress.

Here is how the first rule works with numbers. Tier 1 is $4,000. After a car repair its balance is $2,500, which is below the target by 4,000 − 2,500 = $1,500. The first rule moves $1,500 from Tier 2, taking it from $24,000 to $22,500. The second rule then applies: rebuild the $1,500 in Tier 2 from income before any new money goes to a Tier 3 CD. Nothing was sold at a loss, no CD was broken, and the fix took one transfer.

Two habits keep the page alive. First, give every date a calendar entry: each maturity, each grace period end, each goal, and the annual rerun. Second, keep a single change log at the bottom of the page, one line per revision, with the date and what moved. When you reopen the plan in a year you will see why a number changed and whether you followed your own rules.

The one-page template

Copy this into a document and fill every blank. Use whole dollars, days for windows and dates for maturities. Where the table asks for insurance, enter the total of all balances in that bank and category, and the amount over $250,000.

1. Inputs

2. Tiers

3. Dated goals

4. CDs and maturities

5. Rules

Checking the finished plan

Before you close the page, run four checks. Do the three tiers sum to no more than your total cash, and is the surplus or shortfall written down? Does every dated goal have a CD, a Tier 2 source, or another named source? Does every bank and category total stay at or under $250,000, or is the excess marked as a decision? And is there a date on the calendar for the next maturity and the next rerun?

The interest figures above are before tax. Our note on CD interest and phantom income explains when CD interest is taxed.

Go deeper

Rate direction and term choice are covered in the yield curve and choosing a term and when rates rise or fall. Alternative structures are in ladder, barbell, bullet or one long CD and callable, step-up and no-penalty CDs, and how a CD is held is in bank-direct versus brokered CDs. For vehicles beyond bank cash, see tax-exempt municipal money market funds, ultra-short bond funds and prime money funds, and the cost of idle cash.