Cash Reserve Coverage Calculator

How to calculate your cash reserve coverage?

Cash reserve coverage is the ratio of liquid assets to your average monthly burn rate.

Formula: Cash Reserve = Total Liquid Assets / Average Monthly Expenses

Using the coverage calculator: an example

Example: A household with $15,000 in savings and $3,000 in monthly bills.

Step-by-step calculation:

1. Total all cash and immediate savings
2. Divide by total monthly recurring costs
3. Compare result to the recommended 6-month safety net

Frequently Asked Questions

What counts as a liquid asset?
Anything that can be converted to cash within 24 hours without significant loss, like checking or high-yield savings accounts.

Why is 6 months the standard?
This provides a buffer against job loss, medical emergencies, or major home repairs.

How often should I recalculate?
Review your reserves quarterly or after any major lifestyle change, such as a raise or new mortgage.