Cash Reserve Ratio
Determine the optimal split between cash reserves and invested assets based on your income stability, expense volatility, and risk profile.
Financial Disclaimer
This calculator is for educational purposes only and does not constitute financial advice. Results are estimates based on the inputs provided. Consult a qualified financial advisor before making investment or financial planning decisions.
Inputs
Results
Recommended Cash Reserve
$15,360.00
≈ 8 gaming PCs
Recommended Invested
$34,640.00
≈ 17 gaming PCs
How to Use This Calculator
- Enter your total liquid assets (checking, savings, money market) and monthly expenses.
- Rate your income stability (1 = very variable, 5 = very stable) and expense volatility.
- Set the number of months of expenses you're targeting for your cash reserve.
- Review Months Covered vs your target to see whether you're over- or under-reserved.
- Check Opportunity Cost of Excess Cash to see how much idle cash is costing you versus investing at 7%.
How the result changes with Income Stability
| Income Stability | Recommended Cash Reserve | Recommended Invested |
|---|---|---|
| 1.9 | $34,944.00 | $15,056.00 |
| 4.15 | $26,304.00 | $23,696.00 |
| 6.85 | $15,936.00 | $34,064.00 |
| 9.1 | $12,000.00 | $38,000.00 |
What each input means
- Total Liquid Assets
- Total cash and easily liquidated assets (savings, money market, etc.)
- Monthly Expenses
- Total monthly living expenses including all bills and spending
- Income Stability
- Rate 1-10: 1 = highly variable (freelance), 10 = very stable (salaried)
- Expense Volatility
- Rate 1-10: 1 = very predictable, 10 = highly variable expenses
- Months of Expenses Target
- Base number of months of expenses to keep in cash (commonly 3-6)
How this is calculated
Worked example, using the default values
- Identify Input Parameters4 parametersTotal Liquid Assets = 50000, Monthly Expenses = 4000, Income Stability = 7, Expense Volatility = 4 = 5 input(s) provided
- Calculate Recommended Cash ReserveRecommended Cash Reserve15360 = $15,360
- Calculate Recommended InvestedRecommended Invested34640 = $34,640
- Calculate Cash Reserve RatioCash Reserve Ratio = min(cashReserveRatio30.7 = 30.7%
- Calculate Months of Expenses CoveredMonths of Expenses Covered12.5 = 12.5
Engine last updated . Checked against 2 independently-derived tests — how we verify calculators.
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