If you read any financial planning textbooks, you will encounter the usage of financial planning ratios. A number of financial advisers and planners also use financial planning for their clients. Yours truly do not use financial planning ratio at all. Why do I say that? Here are the common financial planning ratios that are often used:

Liquidity Ratio = Liquid Assets/Monthly Expenses (guideline is 3 to 6 months).

The liquidity ratio measures the amount of liquid cash a person has to meet his or her personal expenditure should there be loss of income. The guideline is 3 to 6 months. However, this ratio is quite meaningless if it is just considered in isolation. A person who is uninsured probably need 50 years of liquid cash because a permanent disability can render a person jobless forever. On the other hand, a well insured person will require much less. Similarly a person ...