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AN OLD & INTERSTING PERSONAL FINANCE RULES.



10 Clever Personal Finance Rules that will help u save more.

1) Rule of 72
2) 100- Age Rule
3) 50-30-20 Rule
4) 1st Week Rule
5) 6X Emergency Fund
6) 20X Term insurance
7) 40% EMI Rule
8) 2X Savings Rule
9) 3*3*3 Plan
10) 25X Retirement Rule.

 1. Rule of 72 

Always wondering when your money will double ? 

This Rule will Help !

Simply Divide 72 by your expected Rate of return.
Ex - if a bond is Giving 10% returns, 
Divide 72 by 10 = 7.2 Years

Note - This rule provides close but not exact outcome. 

2.100 - Age Rule

Worried about asset allocation ? i.e. how much should you invest in Equity vs Fixed income ?

-Simply Subtract your age from 100 and that is your allocation to equity

Eg - If your age is 25,
100 - 25 = 75

Thus 75% of your investments should be in equities

3. 50-30-20 Rule

Struggling with budgeting ? 
Divide your income like this :

➡️50% Spend on needs (bills, education, transport, food etc)
➡️30% on wants (Holidays, Movies, restaurants etc)
➡️20% Savings and investments


4. 1st Week Rule

Remember you had to save and invest 20% of your income?

Do it in the first week of the month, i.e. as soon as you receive your payout. 

Don’t wait for all expenses to be over. 

This brings discipline in investing.

5. 6X emergency fund

Before investing in fancy instruments, ensure that you have parked enough money in your savings account to meet your monthly expenses for 6 months. 

I.e if your monthly expenses are 25K, you should park 1.5 lacs in your bank account. 

6. 2X Savings rule

➡️Ask your Bank to activate “Auto-Sweep” in your savings account.

It basically increases your yield on savings account to 5-7% by giving you FD like returns while you enjoy Flexibility of a savings account. 

7. 20X Term Insurance

It says that your Life insurance cover should be 20 times your annual income

Ex- If your annual income is 5 lacs, get a term life cover of 1 crore


8. 40% EMI Rule

The maximum loan you can take should be such that all your EMIs should not eat up more that 40% of your net monthly income

➡️Ex - If you bring home 50K a month, your EMIs should not me more than 20K a month. 

9. 3*3*3

Components of a Financial plan

3 Critical Components

-Life insurance
-Health Insurance
-Emergency Fund

3 Need based Tools

-National Pension Scheme
-Sovereign Gold Bond
-Debt repayment plan

3 Wealth Creation tools

-Equity MF
-Real Estate
-Stocks


10.25X investment Rule 

Rule says that u can think abt retirement when u hv funds worth 25 times your annual expenses

-If your annual expense is 10 lacs, you can think about retiring if you have a corpus of 2.5 crores.

-This is bare min., save more if u are retiring early

END 🙏ðŸŧ

Sources:livemint,ChatGPT& Your Money or Your Life (Author: Vicki Robin)

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