If you suddenly lost your source of income, how long could you afford to pay your bills and live your life as if nothing had happened?
With so many layoffs hitting tech companies in recent months, many who thought their jobs were secure are finding out otherwise. Once you lose your job, it could be many months before you find another that pays as well. Until then, there's unemployment, but chances are that won't cover all your bills until you land your next job. In the worst case, that source of temporary income could run out after you've exhausted your benefits and before you take your next job.
If you think your job could be at risk, it will be to your advantage to prepare yourself for these scenarios. One place to start is to calculate your basic liquidity ratio. In finance, analysts will calculate this ratio for companies to assess how capable they are of paying their short-term debt obligations. In personal finance, the basic liquidity ratio can be used to determine how long an individual or family could continue to meet their household expenses using their cash assets after losing their job. The higher the ratio, the longer they can sustain themselves without additional income. It’s a useful tool for planning and managing finances during uncertain times.
Cash assets refers to all the money you have in your checking, savings, or perhaps your retirement savings accounts. It can also include any things or assets you own that you can easily sell as quickly as you might need to keep paying your bills.
We've generated a new tool that will calculate your basic liquidity ratio (more on that later...), where you can enter the value of your total monetary assets and your total monthly expenses. It will determine your liquidity ratio, which in this context, will directly correspond to how many months you can keep paying your bills and living your life as if you hadn't lost your source of income. If you're accessing this article on a site that republishes our RSS news feed, you may need to click through to our site to access a working version.
| Total Monetary Assets: | |
| Monthly Expenses: | |
| Liquidity Ratio: |
For the default scenario, with $6,000 in total monetary assets matched against monthly expenses of $4,800, the basic liquidity ratio works out to be 1.25. A household with these assets and expenses would last 1.25 months (or about 5 weeks) before running out of money. For this context, the higher the ratio, the more time you have to find your next job.
If you want to find out how unemployment benefits might affect the results, you have two alternatives to simulate them. You can either estimate your monthly unemployment benefits and subtract it from your Monthly Expenses or you can calculate the maximum benefit you may receive before it runs out and add it to your Total Monetary Assets. Unfortunately, and for obvious reasons, you cannot do both!...
About the Code
We had Microsoft Bing's AI-powered chat generate the code used in the tool featured in this post. It took about 30 seconds, here's the prompt and the code it created for us.
Generate the javascript code, including html tables, for a calculator that solves for the basic liquidity ratio given both total monetary assets and monthly expenses.
Sure! Here’s a simple JavaScript code that you can use to create an HTML table for a calculator that solves for the basic liquidity ratio given both total monetary assets and monthly expenses:
function calculateLiquidityRatio() {
var totalMonetaryAssets = document.getElementById("totalMonetaryAssets").value;
var monthlyExpenses = document.getElementById("monthlyExpenses").value;
var liquidityRatio = totalMonetaryAssets / monthlyExpenses;
document.getElementById("liquidityRatio").innerHTML = liquidityRatio;
}<table>
<tr>
<td>Total Monetary Assets:</td>
<td><input type="number" id="totalMonetaryAssets"></td>
</tr>
<tr>
<td>Monthly Expenses:</td>
<td><input type="number" id="monthlyExpenses"</td>
</tr>
<tr>
<td>Liquidity Ratio:</td>
<td id="liquidityRatio"></td>
</tr>
</table>
<button onclick="calculateLiquidityRatio()">Calculate</button>This code creates an HTML table with input fields for total monetary assets and monthly expenses, and a button to calculate the liquidity ratio. When the button is clicked, the calculateLiquidityRatio function is called, which calculates the liquidity ratio and displays it in the table.
Is this what you were looking for?
It was 95% of what we needed. Most impressively, we didn't even have to provide the mathematical formula for the ratio; it found it on its own. We did have to add some additional coding so you can run it, but we view that as comparatively trivial.
Image credit: Stable Diffusion DreamStudio Beta: "U.S. $100 dollar bills flowing out of a faucet, digital concept art".