Working Capital

Personal Finance

In personal finance, working capital is your liquid assets minus short-term liabilities -- essentially how much cash you have to meet obligations without selling long-term investments. Your emergency fund is its personal finance equivalent.

In detail

Recommended: 3-6 months of monthly expenses in liquid assets. Signs of inadequate working capital: relying on credit card for monthly expenses, missing SIP instalments, taking personal loans for routine expenses. Keep in savings account + liquid fund only.

Formula

Personal Working Capital = Liquid Assets - Short-term Liabilities Liquid assets: savings + liquid fund + FDs maturing within 3 months

Real-life example

🇮🇳 India example

Smita earns Rs 80,000/month. Monthly expenses Rs 55,000, EMIs Rs 15,000. Target emergency fund (6 months) = Rs 3.3L. She has Rs 3.2L in savings + liquid fund -- just at minimum.

Frequently asked questions

Where to keep emergency fund? ▼

Savings account (instant access) + liquid mutual fund (T+1, 7-7.5% returns). Never in equity or long-term FD -- emergency funds must be instantly accessible without market risk.