06 Personal finance rules that can help you save lot of money and secure your financial future.

Managing your finance can overwhelming, but by following these simple rules, you can take control of your money and achieve your financial goals.

The importance of maintaining an emergency fund, investing in your retirement, and avoiding debt whenever possible. By following these rules, you can build a strong financial foundation that will support you throughout your life.

Rule of 72

We usually calculate ROI (Return On Investment) before investing in any Fixed income scheme, Fixed Deposit (FD), Money Back Plan, where we get 7%, 8% or 10% return. We calculate, how much time it will take to make our money double or we just believe policy seller.

But now it will take just 10 seconds to calculate the required time for to make our money double. By this rule just divide number 72 by interest rate.

72/ Interest Rate = Year required to make your Money Double

For Example: Suppose you are keeping your money as fixed deposit of INR 3,00,000 at the interest rate of 10%. Now

72/10% = 7.2 Years

After 7.2 Years your current balance will be 6,00,000 (Double of 3,00,000)

This rule is moderate interest rate, it works only from 4% to 15% of rate of interest.

100 - Age Rule

Many are having question that, how much they should invest in Gold, Real Estate, Stocks and Mutual Funds. This rule helps them to clear their questions regarding their investment in different- different segment.

By this rule we have to minus our age with number 100.

For Example: If suppose my age is 20, I have to subtract it by 100.

After subtracting 80% I should invest in Equity, and 20% I should invest in other asset class. If you are baring any debt then this rule will not work out.

50/30/20 Rule

50% of your income should be spend on your Needs, like- Electricity bill, Grocery, Rent, etc.

30% of your income should be spent on your Wants, like- Party, Holiday, New Vehicle, Cloths, etc.

20% of your income should Invested in stocks, bonds, etc. In this 20% you should keep as some amount as Savings.

Now the question arises how much we should save and how much need to be invested, for this problem our next rule will help you.

6X Emergency Rule

You have to keep your 6 times monthly expenses as savings. Suppose your monthly expenses is 25,000 Rupees, then you have to keep 1,50,000 Rupees as saving, because in case of emergency we required liquid cash.

You can keep your savings as Fixed Deposits (FD), instead of getting 2% - 3% return, we can get around 6% - 7% return by activating Auto-Sweep option. By this we will get double return.

20X Insurance Rule

20 times more then your annual income, you should should purchase a Term Insurance. Suppose your annual income is 10 lakhs then you need to purchase a insurance of 2 Crore.

40% EMI Rule

40% EMI Rule says that, your loan installment should be 40% of your monthly income, not more then that. But different people choose different time period of time to repay their debt, in such situation this rule will not work out, But you should calculate that your monthly installment should not be more then your 40% of monthly income. You should know how much EMI will be charged every period of time, then only you can take right decision regarding your right loan amount, right tenure. To calculate you tenure and EMI you can use our EMI Calculator. The link given below.

EMI Calculator