Reference
A plain-English guide to the financial terms used in your Personal CFO audit. Skim it, search it, or come back when something on your dashboard needs context.
Everything you own minus everything you owe.
Why it mattersThe single clearest snapshot of where you stand. Tracked over time, it shows whether you're moving forward.
e.g. Assets £180,000 − Liabilities £130,000 = Net Worth £50,000.
Things of value you own — cash, savings, investments, property, pensions.
Why it mattersAssets are what you can draw on, sell, or grow. Not all assets are liquid (see Liquidity Runway).
Money you owe — mortgages, loans, credit cards, overdrafts.
Why it mattersLiabilities create future cash outflows. Higher liabilities mean more of tomorrow's income is already spoken for.
What's left from your income after all essential and discretionary spending.
Why it mattersThis is the surplus you can save, invest, or use to pay down debt. Negative free cash flow means you're going backwards.
e.g. Net income £4,000 − Total spending £3,400 = Free Cash Flow £600.
Free cash flow as a percentage of net income.
Why it mattersTells you how efficient your household is at converting income into surplus. Useful for comparing across time even as income changes.
e.g. £600 / £4,000 = 15% FCF margin.
How many months your cash savings would cover your essential expenses if income stopped.
Why it mattersYour resilience cushion. 3–6 months is a common comfort zone; less than 1 month is a pressure point.
e.g. £9,000 cash ÷ £3,000 essentials = 3 months runway.
Monthly debt repayments as a share of gross monthly income.
Why it mattersA standard measure of debt pressure. Lenders use it; so should you. Lower is healthier.
e.g. £800 debt payments ÷ £4,500 gross income = 17.8% DTI.
What share of gross income goes to housing — rent or mortgage plus essentials like council tax.
Why it mattersHousing is usually the biggest fixed cost. When it climbs above ~30% of income, flexibility shrinks fast.
Spending you choose — eating out, subscriptions, holidays, hobbies.
Why it mattersThe part of your spend you have most control over. Distinguishing it from essentials is the foundation of any meaningful budget.
Spending you can't easily switch off — housing, utilities, groceries, transport to work, minimum debt payments.
Why it mattersEssentials define your baseline cost of living. Liquidity runway is calculated against essentials, not total spend.
Red, Amber, Green — a simple traffic-light system used to flag each ratio.
Why it mattersLets you scan an audit in seconds and see what needs attention versus what's running well. Not a verdict — a signal.
A reference value for what 'healthy' tends to look like for a given ratio.
Why it mattersBenchmarks give context, not rules. Your circumstances may justify being above or below — but the gap is worth understanding.
A specific, prioritised next step generated from your audit.
Why it mattersThe point of running an audit isn't the score — it's knowing what to do next. Directives translate findings into action.
A saved record of your financial position at a point in time, taken once a quarter.
Why it mattersQuarterly cadence is deliberate: enough signal to see trends, infrequent enough to stay above day-to-day noise.
A single weighted number summarising your overall financial health from this audit.
Why it mattersUseful as a one-glance trend marker over multiple quarters. Always read it alongside the underlying ratios — the score is a summary, not the diagnosis.
