Personal Finance Ratios Every Filipino Should Know (So You Can Crush Your Goals) - The Thrifty Pinay

Money is more crucial today than ever. With the increasing costs of goods and services and the difficulty of getting jobs, being smart with money handling is imperative. Learning personal finance ratios can help Filipinos stay ahead of their financial status, and develop better financial habits from a data-driven standpoint.

Financial ratios are popular among businesses to assess their financial health. But finance ratios also help private individuals in their personal financial planning endeavors.

In this article, The Thrifty Pinay explores 14 basic personal finance ratios that every Filipino should know. Using your financial information, you can assess your economic strength and gain a knowledgeable approach to finance management. But first…

What are Personal Finance Ratios?

Personal finance ratios are quantitative measurements used in evaluating a person’s financial health. This information helps them make informed decisions about their finances. In other words, you can ask yourself certain questions like “Am I saving enough every month to reach my financial goals?”, “How close am I to my retirement goals?” or “Does my percentage of current debts make me applicable for a loan?”

Financial ratios provide insights into various aspects of personal finances, which include:

  • Budgeting
  • Debt management
  • Savings
  • Investment performance

By looking at these numbers, Filipinos can track their progress toward financial goals and identify areas for improvement. 

14 Personal Finance Ratios for Filipinos so you can crush your goals

Below, we’ll explore the fundamental ratios in finance that Filipinos must master. Armed with this information, you can stay on top of your financial health, status and progress relative to your goals.

Reminder: The metrics mentioned should not be used as a stand-alone measurement. Your personal finances will have unique circumstances that should be considered as a whole when determining how these ratios can guide you.

1. Emergency Fund (EF) Ratio

Having an emergency is an essential component of personal finance. This cash reserve helps people cover unexpected expenses of financial emergencies, like medical bills, job loss or repairs. 

Financial experts recommend at least 6 months’ worth of living expenses to constitute an emergency fund. That means saving a sufficient enough cushion to live comfortably and handle unforeseen events without relying on credit.

The formula for Emergency Fund Ratio (EFR) is:

EFR = Emergency fund / Monthly living expenses

Let’s say your emergency fund amounts to ₱100,000 and your monthly expenses are ₱ 50,000. You’ll get an answer of 2 which means you can survive 2 whole months without a regular income stream.

2. Liquidity Ratio

Before we define liquidity ratios, let’s first define the term “liquid.”

In the context of finance, liquidity refers to the ease and speed to convert an asset without significant loss of value. Liquid assets allow quick access to funds, which is useful to readily cover expenses.

Cash is the most liquid form of money. Other liquid assets include cash-equivalents like checking accounts, savings accounts and money market funds. Do not include assets that are not liquid such as a car or property.

The liquidity ratio follows this formula:

Liquidity Ratio = Monetary assets / Monthly expenses

Like the EFR, the Liquidity ratio tells you the number of months your liquid finances can support without an income stream. Ideally, your liquidity ratio must be 6, covering 6 months of living expenses that include food, rent, and utilities.

3. Savings Rate/Ratio

Saving money is an elementary concept inculcated in Filipinos at a tender age. However, countless Pinoys still overlook this ancient wisdom. Ideally, you must set aside 10% (or even higher) of your gross income for savings, aside from building an emergency fund. Of course, the higher your savings percentage is, the better! Take note: gross savings include your salary, side hustles, bonuses, dividends and interests.

The savings ratio follows this formula:

Savings Ratio = (Savings / Gross income) * 100

4. Expense Ratios of Investments

Investing is always a scary thing, especially for rookie investors. But there are ways to assess whether an investment is worth your time and money. One parameter used by investors is the expense ratio.

Expense ratios apply to all types of investments with operating costs. Whether that is mutual funds, stocks or exchange-traded funds (ETFs), expense ratios give insight into your potential returns.

The formula for the expense ratio is:

Expense ratio = Total Fund Cost / Total Fund Assets

A lower expense ratio is ideal, which depends on the investment type and industry.

5. Net Worth-to-Total Assets Ratio

Net worth refers to the value of a person’s assets minus their liabilities. The net worth to total assets ratio tells you what proportion of your assets is financed by your net worth. A high net worth to total assets ratio indicates a strong financial position. That means a significant portion of your total assets is financed by your retained earnings rather than debts.

The formula for the net worth to total assets ratio is:

Net Worth to Total Assets Ratio = (Net worth / total assets) * 100

6. Mortgage ratio

Owing a house you can call your own matters so much for Filipinos. The mortgage ratio can help you assess your financial position on how much loan you can take out for a property. While not particularly a specific financial ratio, this metric is a rule of thumb guide for Filipinos planning to take a mortgage.

Simply multiply your gross income by 2.5:


If your gross primary income from your day job is ₱960,000 a year, then a good rule of thumb is to apply for mortgages for ₱960,000 x 2.5 = ₱2,400,000 or less.

7. Asset-to-debt ratio

The asset-to-debt ratio is a popular metric used to assess the financial health of companies which can pretty much be used for your personal finances. This ratio compares your total assets to your total debts or liabilities. Another benefit to knowing your asset-to-debt ratio is learning your solvency, which refers to your ability to pay your debts.

The formula for the asset-to-debt ratio is: Asset-to-debt Ratio = Total assets / total debts

A higher total assets-to-debt ratio shows lenders of long-term loans that you have security in settling your debts. However, a lower total assets-to-debt ratio represents less security in the eyes of the lenders of long-term loans, which also indicates that your cash flow is too dependent on long-term borrowed funds from other companies.

Ideally, your assets should be more than your debts. If you will apply for a loan, this value convinces lenders that you have the financial capacity to pay.

8. Debt-to-asset ratio

The debt-to-asset ratio is very similar to the asset-to-debt ratio in that they use the same elements. But in this case, the formula looks at the percentage of total liabilities you have compared to your total assets.

The formula simply reverses the numerator and denominator from your asset-to-debt ratio:

Debt-to-asset Ratio = Total debts / total assets

Make sure your debts don’t go over 50% of your entire asset collection. If you have a high debt-to-asset ratio, find ways to reduce your debts. Ideally, your debts must only constitute 10% of your total assets. 

9. Debt-to-income ratio

In many cases, Filipinos boldly apply for loans under the preconception that their income can cover the expenses. While that is true, it’s crucial to understand what percentage of your income is allocated for loan or debt repayment.

The debt-to-income ratio is usually used by lending institutions when assessing your borrowing risk and if you are applicable for a loan. Personally, this tells whether the debt burden is too heavy for the amount your make. Here is the formula for the debt-to-income ratio:

Debt-to-income Ratio = (Annual debt repayments / Gross income) * 100

As a rule of thumb, your debt-to-income ratio should not be over 36%. Remember, loans are just one facet of your total expenses. Ensure that after repayment of debts, you still have funds left for savings, emergency funds, and monthly living expenses.

10. Investments-to-total assets ratio

Are you a big investment buff or a conservative investor? The investment to total assets ratio gives you exactly the answer to that question!

This indicates the percentage of your total assets that are invested to beat inflation and help work towards your financial goals. Here is the formula for the investment-to-total assets ratio:

Investment-to-total Assets Ratio = (Investment / Total Assets) * 100

As a rule of thumb, the ratio should be at least 50% or above.

Why 50%? That is to ensure that the depreciation from the part of your total assets that are NOT invested is easily OFFSET by the returns generated by the other half that is invested.

Anything lower than a 50% ratio would mean that you won’t be able to offset inflation and in effect, depreciate your assets in the long run. On the other hand, a 50% ratio would have you to comfortably offset inflation but not really gain anything in addition. So, to grow your wealth, you want to ensure that your investment to total assets ratio is 50% and above.

11. Retirement Savings Ratio

The retirement savings ratio tells you the proportion of an individual’s income that is allocated for retirement. It’s always important to consider the long game as soon as you start generating income. 

Ideally, your retirement savings should amount to at least 25 times your annual gross income. If you earn ₱100,000 a year, strive to save at least ₱2,500,000.

The retirement savings ratio tells you how much you dedicate to your savings out of your income. Here is the formula:

Retirement Savings Ratio = (Retirement Savings / Income) * 100

Once you know the percentage, you can assess whether you can hit the target. If not, increase your retirement savings allocation.

12. Return on Investments Ratio

Profitability is perhaps the most important element for an investment, and the ROI ratio provides that snapshot. However, while it tells the profitability or efficiency of an investment, it does not include the time value of money. Nonetheless, if you need a quick insight into how your investments are faring, this is a good metric.

The formula for the ROI ratio is as follows:

Return on Investment Ratio = [ (Current Value – Initial Cost) / Initial cost ] * 100

For example, you bought 100 shares of ABC company worth ₱100 per share. This would give you an initial cost of ₱10,000 ( ₱100 x 100 shares). After a year, one share increased to ₱120 per share. The current value of your 100 shares would then be ₱12,000 ( ₱120 x 100 shares). Using the ROI formula above, it would give you an answer of 20%.

The ROI ratio depicts how well (or not so well) your investments are performing. Although an ideal rate is generally between 7% and 10%, you should allow your financial goals to inform your targeted returns.

13. Financial Freedom ratio

The financial freedom ratio, or freedom ratio for short, is not a widely recognized financial metric. However, it is an important addition to consider, especially for freelancers and investors who are building additional income streams apart from their primary source of income.

Below is the formula for the financial freedom ratio:

Financial Freedom Ratio = Monthly Investment Income / Monthly Expenses

As an investor or freelancer, your aim is to get an FFR value of 1 or more. That means your side hustle earns big enough to cover your monthly expenses. In this case, you can dedicate your primary income stream to more important causes.

14. Financial Independence Ratio

Every Filipino dream of breaking the generational curse of poor financial management. As such, knowing your progress toward achieving financial independence is crucial. This is where the financial independence ratio comes in.

Financial independence refers to the state where an individual’s income (whether from investments, savings or passive income sources) is sufficient to cover their expenses without the need for active employment.

The formula for this is: Financial Independence (FI) Ratio = (Passive Income / Total Expenses) x 100

A high FI ratio tells you that your passive income is sufficient to cover your total expenses. If your FI ratio is 100% then, in principle, you no longer need employment to support your living expenses and live out your desired lifestyle.

Financial literacy is a hazy subject, especially for Filipinos. For one, being financially responsible is not taught in schools. Most of these are acquired experientially.

But The Thrifty Pinay is here to change that, helping Filipinos succeed in their managing their finances. We hope you found these personal finance ratios helpful in your quest for financial freedom. Good luck!

By Ameena Rey-Franc

Recognized as one of the Top Finance Blogs in the PH. Ameena Rey-Franc (founder of TTP) is a former Banker and BS Accountancy graduate turned Blogger, Keynote Speaker, and entrepreneur. Currently an RFP delegate, she is also the Author of a book about Financial Resilience and has held seminars for reputable companies like GrabFoodPH, Pru Life UK, VISA, JPMorgan Chase& Co., Paypal, Fundline, Moneymax, and many more. The Thrifty Pinay's mission is to empower women to LEARN, EARN, and be FINANCIALLY-INDEPENDENT no matter what life stage they are in.