" Unfortunately they don’t teach Personal Finance Rules in Schools, hence most of us commit mistakes during our investments journey. Let us learn these eight rules of a personal finance, as your important wealth dose"
Number of years required to double your money at a given rate = 72 divided by interest rate e.g : At 6% rate, it will take 12 years ( 72/6) to double
Number of years required to triple your money = 114 divided by interest rate e.g : At 6% interest rate, it will take 19 years ( 114/6) to triple
Number of years required to Quadruple your money = 144 divided by interest rate e.g : At 6% interest rate, it will take 24 years (144/6) to quadruple
We all know that Inflation is the greatest enemy of wealth ! You should be able to quickly calculate the dent in your wealth , due to inflation !
Just Divide 70 by current inflation rate to know how fast the value of your investment will get reduced to half its present value.
Inflation rate of 7% will reduce the value of your money to half, in 10 years (70/7)
It is adviced to divide your assets in various Assets like- Debt , Equity , Gold etc. Since equity is the most favourite asset for all, so everybody wants to know the correct allocation to be assigned to Equity, during your investment journey. This rule is used for asset allocation.
Subtract your age from 100 to find out, how much of your portfolio should be allocated to equities
Example -
Age 30 :
Equity : 70%
Other Assets : 30%
SLR ( Safety, Liquidity & Returns) is the key factor which is used to select the most suitable investment product, by any investor. This rule says that the one should rank their choice of SLR under the scale of 10 .
Your total SLR score should be 10, always to know , how much Risk you should take in your investments
Example :
If , S is 8 | L is 2 | R is 0
This means you are ready to settle with lowest risk free returns, but you don't want to compromise on Safety
Always follow this standard spending rule :
50℅ of your Income into Needs (Groceries, rent, EMI)
30℅ of your Income into Wants ( Entertainment, vacations, etc)
20℅ of your Income into Savings ( Equity, MFs, Debt, FD, etc)
At least try to save 20℅ of your income.
You can definitely save more.
Always put at least 3 times your monthly income in Emergency funds for emergencies such as Loss of employment, medical emergency, Lock Down etc.
This 3 times of your Monthly Income Should be kept in Liquid Mutual Fund Scheme
Never go beyond 40℅ of your income into EMIs.
Say you earn, 50,000 per month. So 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.
While buying a term policy or any Life Insurance cover, always take Sum Assured as 20 times of your Annual Income
Say you earn five Lacs annually, you should at least have one crore insurance cover
I am sure you will start following up these unique Rules in your financial journey . Should you require any help in implementing and executing these rules in your existing investments or insurance, contact us freely
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