The currency basket and liquidity, the rule of thirds

What you'll have at the end

A written split of what you own across three containers, a make-up for your currency basket, and a figure your liquid cash never drops below.

Step one: the rule of thirds

Whatever exceeds three months' expenses and the emergency fund is split in three: a third in physical gold as in the last lesson, a third in cash across a basket of currencies, and a third in your own work, a business you understand, or a skill that raises your income. The proportions aren't sacred; anyone with a growing business raises that third, anyone near retirement raises the gold. But all three stay, and no container is emptied into another.

Step two: never keep your cash in one currency

The local currency is what you spend every day, and some of it is unavoidable. But keeping all your cash in one currency is a bet that it won't fall, and plenty of people lost that bet in a single year. The basket: local currency for three months' expenses and no more, then the rest spread across two or three strong currencies, dollar, euro, dirham or riyal, by what you can reach easily and what you'll need later. Anyone with a child who'll study abroad weights the currency of that country.

Currencies rise and fall against each other, which is why they're combined: one falling is offset by another holding. The purpose is protecting purchasing power, never profiting from the spread; whoever buys and sells currency every week is a speculator, and this course is for savers.

Step three: fix the figure you never drop below in cash

Write a number: three months' expenses in local currency, somewhere you can draw from the same day. That figure never gets invested in anything, however tempting the opportunity. An opportunity that forces you to sell your gold at a loss or your land at half price to buy a fridge was never an opportunity. You'll need the fridge, the crisis will come, and liquidity is what carries you through both without selling.

Step four: keep foreign currency sensibly

Foreign cash at home is exposed to theft, fire and damage, and large amounts of it in a drawer make no sense. A current account in the foreign currency, where the bank gives you nothing on it and you take nothing from it, solves the storage problem, and anything beyond that becomes gold or goes to the third container. Have nothing to do with anyone promising a return on currency; currency is held, never rented out.

Step five: stay away from three things

Cryptocurrency: it evaporates suddenly, and carries enough doubt for a household that wants to keep its money, not gamble it, to stay clear. Property you don't use: a locked flat "as savings" freezes a third of what you own in something that won't sell in a crisis and eats maintenance. Property is for living in, working from, or actually renting out, and it gets its own lesson in the next module. And every "guaranteed fixed return": there's no such thing in halal trade, and a guarantee is the mark of a scam.

Where most people trip

In the enthusiasm after grasping the idea: they turn everything into gold and dollars in a month, then a need appears and they sell on the wrong day. The conversion happens over months, from surplus, and the liquid third stays always.

Tonight's exercise

Write what you own in three boxes: gold, cash by currency, your work. Work out each one's share. Then write the liquidity figure you never drop below, and check it actually exists somewhere you could draw it tomorrow.