But how much cash? That’s the tough question. Not enough in your wallet or in the bank, and every curve life throws you—say, a flooded basement or a trip to the emergency room—becomes a financial crisis, one that could force you to take on new debt or cash out investments at a loss. Too much set aside, and you risk lost opportunities—family vacations never taken, long-term investments never made.

“The right amount of cash on hand is one of my clients’ most common concerns,” says Steven Thalheimer, a financial planner in Silver Spring, Maryland. The number depends on a multitude of factors, including your income, health, family needs and life goals—plus your worries, if they’re keeping you up at night. “It’s a very individual thing,” Thalheimer says.

Not sure about how much you need in liquid assets? You can get a good idea by making a few simple estimates, outlined in these steps.

Total up all your outlays, whether they’re household supplies, dinners out or retirement plan contributions. You’ll find the numbers you need by looking at recent credit card bills, bank statements and pay stubs. Go long: The more months you look at, the less likely you will be to overlook expenditures that occur regularly but not on a monthly basis, like insurance premiums, tax payments and oil changes. “The bigger the time period, the better the data,” says Kristin Pugh, a private wealth manager at Creative Planning in Atlanta.

The result is the amount of money you realistically need per month, on average, when things are going well.

The goal here is to plan for an interruption in your income, or what’s known as a supply emergency. (The other major type of emergency is a demand emergency: a large, unexpected expense.)

To plan for a supply emergency—losing your job, for example—you need to know how much money you would really need to get by each month. To do that, return to your list of expenses and divide them into those that are essential (say, rent, food, medicine) and those that are not (streaming services, alcohol, various memberships). Making that distinction is a very personal process. Would you want to cut back on the birthday presents you give? The haircuts you get? The vacations you take? “Some people say Netflix is pretty essential,” says Dana Levit of Paragon Financial Advisors in Newton, Massachusetts. What’s important is that you’re honest with yourself about what you would be willing to surrender if things go bad, and what you can’t bear to give up. Once you add up what’s cuttable, subtract that number from your current monthly spending. The result is your monthly number for getting by.

Once you know how much money you would need per month to get by in a supply emergency, consider how many months you think it would take to get your income going again.

For years, financial planners have generally recommended having enough cash set aside to cover three to six months’ worth of expenses. “Rules of thumb are a good starting point, but each situation is going to be different,” says Judith Ward, a senior financial planner at T. Rowe Price.

While there is no simple formula for determining what’s right for you, a minimum of three months of living expenses is a good starting point. As of last December, about two-thirds of the unemployed population had been out of work for up to 14 weeks, a number that has stayed relatively constant over the past year. If you are disabled, it can take at least three months before you can begin to collect disability insurance. (Social Security Disability Insurance can take five months or more, after you are disabled, to kick in.)

Consider these other factors when thinking about a supply-side emergency.

→ Job stability: How secure does your employment feel? A physician’s assistant—the profession ranked as the most stable in a recent U.S. News & World Report jobs analysis—will likely need a smaller emergency stash than a salesperson working on commission for a tech start-up. Someone who works for a seasonal landscaping business needs extra reserves to cover months of limited work.

→ Employment type: Should you lose a job, the time it will take to find a new one depends on your industry and your particular position. A 2017 study by the job site Glassdoor, for example, found that the average interview process for software developers and regional sales managers lasted about 40 days. For delivery drivers and retail salespeople, it was a little more than a week.

→ Age: Thirty-eight percent of unemployed adults ages 45 to 54 were unemployed for 15 or more weeks in the latest report. The number was 44 percent among unemployed people ages 55 to 64.

→ Income streams: If you are the sole earner in the household, you might want more months of savings on hand—maybe even nine to 12, says Levit. But if you’re in a two-income household in two very different industries, you may feel comfortable with less, believing that one salary could cover a good portion of your expenses should you lose the other.

→ Dependents: If the household is just you and a partner, or you alone, it may feel easy to cut back. But if you’re raising kids, many of their expenses—food and education, for starters—are harder to reduce. Similarly, if you’re supporting an adult unable to care for himself or herself, cutting back on health care and caregiving may not feel like an option.

Whatever number of months you decide on, multiply that figure by the amount of money you need per month to get by during a supply emergency. That’s how much money you need to be safe. (See “Where to Keep Your Cash Now,” below.)

Now let’s consider demand emergencies—a broken major appliance, for example, or a trip to the ER. If you have enough money in the bank to cover a few months of lost income, you probably have enough to cover a sudden expense as well. A 2020 academic paper written in collaboration with AARP found that having $2,500 in a bank account correlated with a lower chance of financial distress years later. Bottom line: It’s up to you whether you want to add extra money to your safety cushion from Step 3 to cover potential surprises. But if a surprise expense comes along, you’ll want to replenish the amount you took from your reserve and bring it back up to a safe level.

An expense that’s out of the ordinary isn’t necessarily unpredictable. Perhaps you would like to take a vacation or buy a new car. Or maybe your daughter and her boyfriend are headed toward marriage, and you want to chip in for the wedding. Things will go more smoothly if you start putting money away—separate from your emergency fund—so that when the time comes to open your wallet, you don’t have to borrow at short notice or sell investments when markets are down.

Think of these funds as separate from an emergency fund—a “liquidity bucket,” in the words of Anthea Perkinson, who operates Monterey Associates, a financial planning firm in Pelham, New York. Your goal with such funds is to make sure that money is available when you need it.

Don’t despair if having three months’ worth of living expenses on hand seems like an impossibly high bar. You’re not alone: Only about 4 in every 10 Americans have enough savings to cover an unplanned expense of $1,000, according to a recent survey by Bankrate.

You can build up your cash reserve bit by bit. “Start small and remember that every dollar saved can cover some kind of emergency,” says Pugh of Creative Planning. She cites the example of a woman she was advising who had managed to set aside just $100 in her emergency fund. Soon afterward, when the battery in the woman’s car died, that $100 in the bank—enough for a new battery—sure came in handy.