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*TEN PERSONAL FINANCE* *RULES WE ALL MUST KNOW*
1) Rule of 72 (Double Your Money)
2) Rule of 70 (Inflation)
3) 4% Withdrawal Rule
4) 100 Minus Age Rule
5) 10, 5, 3 Rule
6) 50-30-20 Rule
7) 3X Emergency Rule
8) 40℅ EMI Rule
9) Life Insurance Rule
10) What is a 30-30 rule?
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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 years. At 6% rate, it will take 12 years At 9% rate, it will take 8 years
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Eg- if your annual expense after 50 years of age is 500,000 and you wish to take VRS then corpus with you required is 1.25 crore. Put 50% of this into fixed income & 50% into equity.
Withdraw 4% every year, i.e.5 lacs. This rule works for 96% of time in 30 years period
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Equity : 70% Debt : 30% . But if your Age is 60 so (100 - 60 = 40) Equity : 40% Debt : 60%
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Divide your income into
50℅ - Needs (Groceries, rent, emi, etc)
30℅ - Wants / Desires (Entertainment, vacations, etc)
20℅ - Savings (Equity, MFs, Debt, FD, etc) At least try to save 20℅ of your income. You can definitely save more..
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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 In fact, one can have around 6 X Monthly Income in liquid or near liquid assets to be on a safer side.
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Say if you earn, ₹ 50,000 per month. Then 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.
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These rules are equally useful for young, youth and old. Hope you will find them simple, useful and handy.
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A 30-30 rule of thumb says an individual earns for 30 years, to provide for 30 years of post-retirement life where the individual's income would have stopped, yet, the need to maintain similar life style exists.
*Courtesy:-*
*Goutam Karmakar CFP*
MD of SKILLEDGE DIGIGURUKUL ACADEMY