Rule of 72

No. of years required to double your money at a given rate, U just divide 72 by interest rate

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

Rule of 70

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.

4% Rule for Financial Freedom

Corpus Required = 25 times of your estimated Annual Expenses.

Eg- if your annual expense after 50 years of age is 500,000 and you wish to take VRS then the 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

100 minus your age rule

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

Suppose your Age is 30 so (100 - 30 = 70)

• Equity : 70%
• Debt : 30%

But if your Age is 60 so (100 - 60 = 40)

• Equity : 40%
• Debt : 60%

10-5-3 Rule

One should have reasonable returns expectations

• 10℅ Rate of return - Equity / Mutual Funds
• 5℅ - Debts ( Fixed Deposits or Other Debt instruments)
• 3℅ - Savings Account

50-30-20 Rule - about allocation of income to expense

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...

3X Emergency Rule

Always put at least 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.

40℅ EMI Rule

Never go beyond 40℅ of your income into EMIs.

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.

Life Insurance Rule

Always have Sum Assured as 20 times of your Annual Income.

20 X Annual Income
Say you earn ₹ 5 Lacs annually, you should atleast have 1 crore insurance by following this Rule.

Rule of 114 (Triple your money)

Rule of 114 is similar to Rule 72 (Double your money)

Rule of 114 is (Triple your money) Rule of 114 can be used to determine how long it will take an investment to triple, For example Any Investment at 10%, will triple in about 11 years (114 / 10)

Rule of 144 (Quadruple your money)

Rule of 144 will tell you how long it will take an investment to quadruple.

For example Any Investment at 10%, will quadruple in about 14.5 years (144 /10).

There is an important implication to the Rules of 72, 114 and 144. Notice that the numbers don't double? That is, while it takes the interest rate divided into 72 to double, the interest rate divided into 144 doesn't triple, it quadruples! That's the power of compounding. And what's the moral of this story--Save early and save often.

3% Rental Yield Rule

A property you own should generate an annual rental yield of at least three per cent of the property purchase cost. For example, if property costs Rs 50 lakh, your annual rent should be at least Rs 1.5 lakh. This is a loosely applied thumb rule, and the actual rental yields may vary wildly from one location to another. But a good point of reference nevertheless.

30% Credit Limit Rule

Try to keep your credit utilisation ratio (the percentage of your credit limit you are using) to 30 per cent for any month. For example, if your credit card limit is Rs 1 lakh, and if you spend Rs 30,000, your CUR. Capacity Utilization Rate (economic measurement) is 30 per cent. Try and stay within this limit, because it will help improve your credit score.

Revolving Credit Formula

Revolving Credit Formula:- (1+i%)^12-1.

Example:- If a credit card Company charge's 3% per month as interest.

The Compound Annual cost is = (1+3%)^12-1 = 42.6%

These are rules of thumb — the most basic guidelines to better manage your money. Depending on your life stage, income, and life priorities, you may fine-tune these rules to achieve the best results.