What are the 9 Financial Ratios and Rules of Thumb that you need to know and achieve towards financial freedom?


We will start of with 4 rules of thumb that help you to know how you are doing in these areas.

Savings & Investment

Savings & Investment = Savings or Investment / Total Income

You need to save/invest at least 20% of your income. If you are an employee whereby your EPF contributions are 23% or more, you should aim to save another 20% of your income to achieve a savings/investment rate of 40% above. The more you save/invest, the faster your journey towards financial freedom.


Insurance Costs

Insurance Costs = Insurance Premiums / Total Income

You should be spending 10% or less of your income in paying for your life insurance premiums. If you’re single with no dependents, the spending on insurance should be 5% or lesser. While this is a rule of thumb, 5%-10% should be sufficient for life insurance premiums to adequately cover your risk management needs. Keep your insurance and investments separate.


Giving & Education

Giving & Education = Giving or Education Costs / Total Income

Giving such as to parents and charitable causes are good. Likewise, investing in your own growth and education is excellent too. However, it is prudent that giving/education is not in excess until you end up having cashflow problems. A good gauge is that giving/education costs should be 10% or less of your total income.



Spending = Total All Other Expenses / Total Income

Total spending on all expenses should be no more than 60% max of your total income. If you are spending above 60% of your income on expenses, you are likely living in excess. You need to track and look into your expenses in detail to see what unnecessary expenses you can cut. It is not about lowering your quality of life but focusing on cutting spending your money on what does not bring you joy.