Financial Planning Ratios

Net Worth        
Difference between Total Assets and Total Liabilities.
Total Assets includes Cash, FD, Shares, Unit Trusts, Car, Home
Total Liabilities includes any Loan (Credit Cards, Car Loan, Home Mortgage, Overdraft ..etc ).

Liquid Assets        
Cash and other resources that can be easily converted to cash typically within one year. Eg. savings account and fixed deposits

Monthly Expenses        
How much you spend every month.

Liquidity Ratio = Liquid Assets / Monthly Expenses   
- Guideline is Greater or Equal to 3-6 months.
- Shows how many months your current liquid assets can sustain existing monthly expenses, assuming monthly income is suspended (job lost).

Liquid Assets to Net worth = Liquid Assets / Net Worth   
- Guideline is Greater or Equal to 15%.
- Shows what amount of net worth is in Liquid Assets

Savings Ratio = Savings & Investments / Total Income   
- Guideline is Greater or Equal To 10%.
- Shows the percentage that you are saving with current income

Debt-to-Asset Ratio = Total Liabilities / Total Assets   
- Guideline is Less or Equal To 50%.
- Shows how much of your assets are financed by debt. Therefore the lesser the better.

Debt Service Ratio = Annual Loan Payments / Annual Take Home Pay (after CPF)   
- Guideline is Less or Equal To 30%.
- Shows how much Take Home Pay is being used to pay off your loans

Investment Assets to Net Worth Ratio = Investment Assets / Net Worth   
- Guideline is Greater or Equal to 50%.
- Shows how much you have devoted to accumulating money especially for purposes like

Retirement or Long-Term goals.
- Another guideline to note is that this ratio should increase as you get older.

Solvency Ratio = Net Worth / Total Assets   
- Shows how much of your assets really belong to you