The Roadmap to Financial Security: 10 Essential Rules for Personal Finance Planning

Earning money is not enough. You have to learn how to manage it. There are many rules regarding Personal Finance. Why Rules in Personal Finance? There are many basic rules like how much to save, how much to invest, how to invest, and where to invest. In this post, let’s know all about the importance of the Top 10 Rules.

1. Rule of 72

Always remember this Rule of 72 formula. That is 72/Interest Rate. This formula can calculate how many years the amount you invest will double. For Example: If you are making a Fixed Deposit of 10 lakhs, Invest = 10 lakhs, Interest Rate = 7%, then 72/7=10.28. That means it takes 10.28 years for your investment of 10 lakhs to double. That is if you invest in a mutual fund, Invest = 10 lakhs, Interest Rate = 12%, then 72/12=6. That means your invested 10 lakhs will double in 6 years.

2. 100-Your Age rule

The 100-your-age rule is the rule for how much you can invest in Equity. For Example: If your age is 30, Invest = 10000, My Age = 30years, 100-30=70years, 70%=7000(equity), 30%=3000(debt). Out of which you can invest 7000 in equity and the remaining 3000 in debt. That means if you want to invest in Equity, remember the 100-Your Age rule.

3. 50-30-20 Rule

The 50-30-20 Rule will help you to know how to use the money you get if you are earning monthly. Use 50% of your income for your needs (Home needs, Bills, etc). Use 30% of it for your desire (outing, trip, theater, etc.). Always invest the remaining 20% in savings.

4. Emergency Fund Rule

You should always have an emergency fund. If your monthly expenses are 20000, then 20000*6=120000. This amount of 120000 should always be kept in Emergency Fund. Emergency Fund is definitely helpful in your dire situation. If you do not have an emergency fund, you will be forced to take a loan.

5. 20*Insurance Rule

If you are thinking of taking term insurance, you need to know how much the coverage will be. You can calculate your coverage by multiplying your annual income by 20. For Example: If your annual income is 5 lakhs, then 5*20=1Cr. 1 crore as coverage in this term insurance.

6. 40% EMI Rule

Always spend only 40% of your monthly salary on EMI. If you are earning 1 lakh then only 40000 should be spent on EMI. 60000, 70000 should not be spent on EMI. If you are thinking of taking a loan or EMI, remember the 40% EMI rule.

7. 25* Retirement Rule

This rule will help you calculate how much you should have in your retirement account. During this period, they retire at the age of 30-40. 25* Annual Expenses. For Example: If your annual expenditure is 1000000, then 25*1000000=2.5Cr. If you have 2.5 crores in your account, it means you are ready for retirement.

8. 10 Sec Rule /24-Hour Rule

The 10 Sec Rule / 24 Hour Rule is a spending rule. If you are going out to make expenses, buy some things that you don’t need. Don’t do it and think for 10 seconds before buying. That is, if you want to spend more money, you should use the 24 Hour Rule. You should think 24 hours before buying expensive items like Car, Bike, iPhone, etc.

9. Invest First Spend Later

Saving is the first thing you should do when you get money. If you don’t make savings with the money you get, you can’t multiply the money. If you keep spending without saving money, you will end up borrowing money in difficult situations. So more importance should be given to Savings.

10. 3*3*3 Investment Plan

3*3*3 Investment Plan means you should have health insurance, term insurance, and an emergency fund. Next, if you have taken any loan, you should pay it off, plan for retirement, invest in gold, etc. The next 3*3*3 Investment Plan is to invest in Stock market investment, Mutual funds, Real estate, etc.

Following these ten vital rules for non-public finance planning can extensively enhance your financial properly-being. Remember that monetary success is an adventure, and consistency and subject are key. By putting clean dreams, growing finances, saving and making an investment often, and making knowledgeable decisions, you will be on the course to economic balance and attaining your lengthy-term financial aspirations.