While the Jaws Ratio is commonly used in corporate finance and security analysis, you rarely hear or read about that measure in the context of personal finance. This is to some surprise, as households – like businesses – have to manage their economic resources and taking into account various financial risks and (life) events. Almost everyone has money issues – companies and people alike – so why not use that concept to increase your personal savings rate to put you in a position to make more of the money you earn?

First, I want to show you what that Financial Ratio stands for, how it is calculated and then – and this is most important – how you can benefit from knowing that concept.

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I have never been a big spender. I have always been a much better saver instead. Money is energy, often traded against time and effort. It is too valuable to be wasted. The consumerism mantra “one earns to spend” is a very tricky one.

You cannot have a voluntary, independent life while drowning in debts and living from paycheck to paycheck. As long as you have to work hard for your money to make a living, you are stuck in a treadmill and will never be free. You cannot rise to the top of your capabilities and pursue your dreams.

draw and shape your (financial) life

drawing by the author

You must put yourself in a position – financially and mentally – in which you have options. Read more… »