Are your finances healthy? Take test to find out

This test was extracted from an Straits Times article.

https://www.straitstimes.com/business/invest/are-your-finances-healthy-take-test-to-find-out

Let old turtle take the basic financial check of my family expense to see whether my family financial is healthy or unhealthy.

Excited... let's start now!

1. TOTAL DEBT SERVICING RATION (MONTHLY LOAN/SALARY)

Turtle family: 0% (Nil loan)

Verdict: Pass

(Recommended: Below 60%. Should aim for below 35%.)

2. HOUSEHOLD LIQUIDITY RATIO (TOTAL CASH SAVINGS/TOTAL MONTHLY COMMITMENT)

Turtle family: 8.2 months

Verdict: Marginal Pass

(Recommended: More than 6 months.)

3. CASH TO NET WORTH RATIO (CASH/ASSET - DEBT)

Turtle family: 51%

Verdict: Pass

(Recommended: More than 15% means) FYI, below 15% means you are asset rich but cash poor.)

4. SAVINGS RATIO (MONTHLY SAVINGS/SALARY)

Turtle family: 51%

Verdict: Pass

(Recommended: It is prudent to save at least 10% of monthly pay)

5. DEBT TO ASSET RATIO (TOTAL DEBT/TOTAL ASSET)

Turtle family: 0% (Nil loan)

Verdict: Pass

(Recommended: Below 50%. Should reduce loan exposure where possible)

Conclusion: Turtle family passed all 5 basic tests to evaluate our financial health.

These are really basic ratios and it doesn't take into consideration of any of your side income/passive income etc apart from your active monthly salary so IMHO, it might not give you the most accurate and holistic picture.

But still, its good as a basic tool to monitor your family financial health.

FYI, I did not include our dividends and bond coupon interest so if I included these figures, our family financial health would be even rosier.

What can be improve? If I wanted to improve, I will want improve household liquidity ratio from 8.2 months to at least 12 months to 18 months. In fact, me and my wife are already saving more cash from my monthly salary since Jan 2020.

Reason being, this global pandemic taught us that there could be an event that possibly put you out of job for more than 1 year, for example if I am from the aviation or travel/hospitality industry.

Quoted from the article "BEING PRUDENT IS KEY TO SURVIVING CRISIS".

In fact, I already practiced financial prudence in my lifestyle in order to prepare for any unforeseen crisis (even for extreme crisis like this pandemic) so I am totally agreeable to the statement above.

In my own simple words, Better to be safe than Sorry.