Personal Finance Rules - A Thread

Personal Finance Rules -  A Thread

Rule of 72 (Double Your Money)

Rule of 114 (Triple)

Rule of 144 (Quadruple) 

Rule of 70 (Inflation)

4% Withdrawal Rule

100 - Minus Age Rule

10, 5, 3 Rule

50-30-20 Rule

3X Emergency Rule

40℅ EMI Rule

Life Insurance Rule

*Rule of 72*

No. of yrs required to double your money at a given rate, U just divide 72 by interest rate

Eg, if you want to know how long it will take to double your money at 8% interest, divide 72 by 8 and get 9 yrs

At 6% rate, it will take 12 yrs

At 9% rate, it will take 8 yrs

*Rule of 114*

No. of years required to triple your money at a given rate, U just divide 114 by interest rate.

For example, if you want to know how long it will take to triple your money at 12% interest, divide 114 by 12 and get 9.5 years

At 6% interest rate, it will take 19yrs

*Rule of 144*

No. of years required to quadruple your money at a given rate, U just divide 144 by interest rate.

For eg, if you want to know how long it will take to quadruple your money at 12% interest, divide 144 by 12 and get 12 yrs.

At 6% interest rate, it will take 24yrs

*Rule of 70*

Divide 70 by current inflation rate to know how fast the value of your investment will get reduced to half its present value. 

Inflation rate of 7% will reduce the value of your money to half in 10 years.

*4% Rule for Financial Freedom*

Corpus Reqd- 25*Annual Expenses

Eg- annual expense is 500,000 then corpus required to retire is 1.25 cr.

Put 50% into fixed income & 50% into equity.

Withdraw 4% every yr, i.e.5 lac.

This rule works for 96% of time in 30 yr period

*100 minus your age rule*

This rule is used for asset allocation. Subtract your age from 100 to find out, how much of your portfolio should be allocated to equities

Age 30

Equity : 70%

Debt : 30%

Age 60

Equity : 40%

Debt : 60%

*10-5-3 Rule*

One should have reasonable returns expectations

10℅ Rate of return - Equity / Mutual Funds

5℅ - Debts ( Fixed Deposits or Other Debt instruments) 

3℅ - Savings Account

*50-30-20 Rule - Allocation*

Divide your income into

50℅ - Needs - Groceries, rent, emi

30℅ - Wants - Entertainment, vacations, etc

20℅ - Savings - Equity, MFs, Debt, FD, etc

Atleast try to save 20℅ of your income.

You can definitely save more

*3X Emergency Rule*

Always put atleast 3 times your monthly income in Emergency funds for emergencies such as Loss of employment, medical emergency, etc. 

3 X Monthly Income

You can have around 6 X Monthly Income to be on a safer side

*40℅ EMI Rule*

Never go beyond 40℅ of your income into EMIs. 

Say you earn, 50,000 per month. So you should not have EMIs more than 20,000 .

This Rule is generally used by Finance companies to provide loans. You can use it to manage your finances. 

*Life Insurance Rule*

*Always have Sum Assured as 20 times of your Annual Income* 

*20 X Annual Income*