by Georgii Verbitskii
Method & author
The ratio shows how many years of normal outflows your net investable capital covers.
The formula
K = C / (12 × E). C is counted assets minus counted debts. E is normal monthly spending plus obligatory payments, including loan payments. We also show M = C / E — capital in months of outflows.
What counts in C
Cash, accessible deposits, investment accounts, securities, crypto, rental property and loans you expect back. Your own home and personal car don't count. The mortgage on your own home is excluded together with the home, while its payment stays in E.
Debts by purpose
Investment-property debt and unsecured debt are deducted. If money borrowed against your home went into counted investments, that debt is deducted too. A value already stated net of its debt isn't reduced again. Borrowing 10,000 adds 10,000 of debt: a loan never raises K.
The author's threshold
The author's milestone is K strictly above 5. Exactly 5 stays on the previous tier. Comparison uses the unrounded number. At K = 5, a year of outflows equals 20% of capital — that doesn't prove the capital can cover spending indefinitely.
What the ratio doesn't do
It doesn't model returns, inflation, taxes or how quickly assets can be accessed. A rental flat counts as capital but isn't cash today. That's why the accessible reserve is measured separately.
About the author
Georgii Verbitskii is the author of the method. The sequence of next steps is based on his article “How to manage money wisely, or the path to a free life” (vc.ru, 18 December 2024, in Russian). The historical portfolio example in the article is not turned into advice.
Read the article on vc.ru