The Minimum Level of Money for saving at Personal life and Business
Originally published: 03/10/2022 09:16
Publication number: ELQ-94749-1
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The Minimum Level of Money for saving at Personal life and Business

Equation of the Minimum Level of Saving (MLS) For Business and Personal Life

Description
Actual savings of physical cash is Essential to provide protection from unexpected scenarios and circumstances

so I prepared an equation to calculate the minimum level of cash that you are supposed to have to cover day to day operation at company and day to day personal life

- No Reference for that equation from University or financial Institute but it is just an idea from me and it has a little reference that may support my equation as will be mentioned at the next points
- If you are working at inventory control, Cost Control, Supply Chain, FP&A etc
;You know Safety stock calculation which means what is the safety quantity of inventory for each item should be kept to cover the short term needs from daily operation
And as a result of this why we can't apply this method to get the minimum level of cash that companies or people
should keep to cover daily spending at personal life and also at daily operations at companies


- Be Noted that advices from financial experts at companies is to keep Cash that is sufficient to cover your operations from 6 Months to one year

This is a common advice especially when starting a new business to cover daily operation and arrive breakeven point and make profits
it's a journey may be delayed to make profits so financial experts recommend from 6-12 Months savings 
So, You have two options now 
1- Get Identical Amount of Minimum level of cash you should keep from My Equation "MLS Minimum Level Of Saving" If I can write that.
[Maximum daily Spending x maximum lead time to get Income] – [average daily spending x average lead time to get Income] = The Minimum Level of Saving
2 - Financial Experts : 6-12 Months and it's very highly recommended for startups and business start for the first time
as it doesn’t have any actual figures it has just forecasting Numbers 
Excel Sheet has two examples 
- Personal Savings

Maximum Daily Spending ($)  : Maximum  Money needed for Shopping, Fuel, Food etc
Average Daily Spending ($)      :  Average Money needed for Shopping, Fuel, Food etc
Maximum Lead Time to get Income (Days) : Maximum days you can get your salaries
Average lead Time to get Income (Days) : Average Days you can get your salaries     


- Business Example
Maximum Daily Spending ($) : Maximum Cash needed to Cover Day To Day Operations
Average Daily Spending ($) : Average Cash needed to Cover Day To Day Operations
Maximum Lead Time to get Income (Days) : Maximum days you can get your Cash From Clients
Average lead Time to get Income (Days) : Average days you can get your Cash From Clients     

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Minimum Level of Savings

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