Cash Reserve Ratio

This calculator recommends how much of your liquid assets should sit in cash versus be invested, adjusting your target months of expenses for how variable your income and spending actually are. Start from a base target — commonly 3-6 months — and two 1-10 ratings: income stability and expense volatility. A high stability score, such as a steady salary, shrinks the required buffer, while low stability (freelance or commission-based income) or high expense volatility scales it up — the two factors multiply together, then the result is clamped between 3 and 24 months so the recommendation never drops to an unsafe minimum or balloons past what's realistic. Multiplying that adjusted month count by your monthly expenses gives the recommended cash reserve; anything left over from your total liquid assets is flagged as recommended for investing.

The calculator also reports your current cash reserve ratio and how many months your existing balance actually covers, comparing that figure directly against your target to flag whether you're over- or under-reserved relative to the recommendation. Opportunity cost of excess cash applies a flat 7% assumed investment return to any liquid assets beyond your recommended reserve — a simplification, since a real 7% return is a long-run average with volatility rather than a guaranteed annual gain, and comparing it to a near-riskless savings account isn't a perfectly fair trade. The stability and volatility ratings are self-assessed by design, so the calculator can't distinguish a genuinely stable salary from someone who simply rated themselves generously.