This tool helps you assess your financial leverage by comparing what you owe to what you have saved. A lower ratio generally indicates a stronger financial position.
Calculated Debt-to-Savings Ratio:
3
Interpretation: If the ratio is above 1, your total debt exceeds your current savings. If it is below 1, your total savings are greater than your outstanding debt.
The debt-to-savings ratio is a benchmark used to measure your financial cushion against your liabilities.
Formula: Debt-to-Savings Ratio = Total Debt / Total Savings
Consider a scenario where an individual has consumer debt and a modest emergency fund.
A ratio of 1.0 or lower is generally considered healthy, meaning your savings equal or exceed your debt.
It indicates your ability to pay off debts in an emergency without relying on future income.
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