1. What is the Money Ratio?

The Money Ratio is a simple financial metric that compares your income to your expenses. It provides insight into your financial health by showing how much income you generate relative to your spending.

2. How Does the Calculator Work?

The calculator uses the Money Ratio formula:

Where:

• \( Income \) — Your total income (in dollars)
• \( Expenses \) — Your total expenses (in dollars)

Explanation: A ratio greater than 1 indicates you're earning more than you spend, while a ratio less than 1 suggests you're spending more than you earn.

3. Importance of Money Ratio

Details: Tracking your money ratio helps you understand your financial situation, make better budgeting decisions, and work toward financial goals like saving and debt reduction.

4. Using the Calculator

Tips: Enter your total income and expenses in dollars. Both values must be positive numbers. The calculator will compute the ratio of income to expenses.

5. Frequently Asked Questions (FAQ)

Q1: What is a good money ratio?
A: Generally, a ratio of 1.5 or higher is considered healthy, indicating you're earning 50% more than you spend.

Q2: How often should I calculate my money ratio?
A: Monthly calculation is recommended to track changes in your financial situation over time.

Q3: Should I use gross or net income?
A: For personal finance, net income (after taxes) typically gives a more accurate picture.

Q4: What expenses should be included?
A: Include all regular expenses - housing, utilities, food, transportation, debt payments, etc.

Q5: Can this ratio help with budgeting?
A: Yes, tracking this ratio over time can reveal spending patterns and help adjust your budget accordingly.