Definition
Financial Ratios for Individuals
Financial ratios for individuals are simple yardsticks — like savings, debt and liquidity ratios — that summarise the health of your personal finances at a glance.
Key ones include the savings ratio (how much of income you keep), the debt-to-income ratio (how stretched your borrowing is), the liquidity ratio (how long your cash could last), and a solvency or net-worth-to-assets ratio (how much of what you own is truly yours rather than borrowed).
Tracking these a couple of times a year reveals trends a single number cannot: rising debt, falling liquidity, or a stagnating savings rate. They turn a vague sense of 'doing okay' into measurable benchmarks you can act on, much as a company's accounts are read through ratios.
Related terms
- Net Worth StatementA net worth statement is a snapshot of your finances that lists everything you own (assets) minus everything you owe (liabilities), giving a single number for your wealth.
- Debt-to-Income Ratio (Individuals)For individuals, the debt-to-income ratio is the share of your monthly income that goes toward repaying debts such as EMIs and credit-card dues.
- Savings RatioThe savings ratio is the share of your income that you save or invest, rather than spend — a key gauge of how fast you are building wealth.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.