3 ms·

Small point but I think you might mean Liabilities divided by Assets = 2. (aka the 6 month rule) > It's literally the current assets (cash you could get acces

Small point but I think you might mean Liabilities divided by Assets = 2. (aka the 6 month rule) > It's literally the current assets (cash you could get access to in a year) divided by the current liabilities (all expenses due in a year) Essentially you should have a 6 month runway. If you have 25K cash and 50K costs per year then the $25K will buy you 6 months to get yourself over a layoff/health issue/etc. Just a small point because it's a rule I live by and you freaked me out for a moment thinking the advice/goalposts had move way beyond what I've saved for. thanks

jonbarker 9y ago
No, the numerator is current assets and the denominator is liabilities. This way if you have half of what you are about to spend in a year, your ratio is .5. If you have double what you are about to spend in a year, your ratio is 2. In your example, your current ratio is .5. Still you are doing way better than most people I know and the stats on national savings and lifestyle requirements bear this out as well.