Golden Personal finance rules to become rich is all about handling your money. Working on your finances can help you have control over your money and multiply it manifold. However, some thumb rules for personal finance can help you become rich.
- Rule of 72: This rule will give you a rough idea of the number of years that are required to double your money in any investment tool. It is necessary to divide the rate of return by 72 to know the time to have double investments.
- 100-age rule: The basic principle behind it is that your exposure to the investment will reduce with your age. It is also known as the proportion of equity as a component of the portfolio. The reason behind these investments is that they provide high returns at great risk.
- 1st-week rule: To have discipline in investing, it is essential to save and invest the 20% assigned amount for saving. This should be one in the initial week. Try to avoid impulsive shopping; try to wait for a week. And if you still have a feeling, then buy it or save money.
- 6x emergency fund: The future is uncertain; people should try to have six times their monthly income for emergency funds. This can be used during crises like loss of employment, medical issues, etc. For example, if your expenditure is Rs. 1 lakh, then your emergency fund should be Rs. 6 lakhs for unfavorable situations.
- 25x retirement rule: This is the best rule when it comes to retirement savings. You need to save 25 times the annual expenses. If the funds are 25 times your annual expenses, then you can opt for retirement.
- 50-30-20 rule: This is the most common and simple budget strategy. This rule is about taking your salary to home into three categories: 50% of needs, 30% of wants, and 20% of savings. This will allow people to keep one portion of each thing every month.
- 20x term insurance: To know the minimum sum assured when it comes to life insurance, you can do it by twenty times the annual income. For instance, if your annual pay is Rs. 24 lakh, then life insurance should be around Rs. 4 crore 80 lakh.
- 2x savings rule: Your money in the savings bank is going to offer poor returns. So, try to activate the ‘Auto-sweep’ facility rather than a simple savings account.
- 40% EMI rule: This rule is simple: you should be clear that your monthly installment debt is not exceeding 40% of your income. This will allow you to keep everything in check
