I've spent 11 years studying finance.
Wild.
Here are the 7 most important finance rules:
Wild.
Here are the 7 most important finance rules:
1. 50/30/20 Rule
Budget your income based on your:
- Needs (food, rent, etc.)
- Wants (vacations, new cars, etc.)
- Goals ( savings, extra debt payments, etc.)
Needs = 50% of income
Wants = 30% of income
Goals = 20% of income
Budget your income based on your:
- Needs (food, rent, etc.)
- Wants (vacations, new cars, etc.)
- Goals ( savings, extra debt payments, etc.)
Needs = 50% of income
Wants = 30% of income
Goals = 20% of income
2. 300 Rule
Take your current monthly expenses & multiply that amount by 300.
The result is a rough guideline on how much money you need to save (and invest) to keep the same lifestyle you have now, during retirement.
Take your current monthly expenses & multiply that amount by 300.
The result is a rough guideline on how much money you need to save (and invest) to keep the same lifestyle you have now, during retirement.
3. Home 3X Rule
Donβt buy a house that costs more than 2.5x to 3x of your gross annual salary.
Donβt buy too much house.
Especially if interest rates are high, maybe consider buying a home only 2x your annual gross income.
Donβt buy a house that costs more than 2.5x to 3x of your gross annual salary.
Donβt buy too much house.
Especially if interest rates are high, maybe consider buying a home only 2x your annual gross income.
4. Rule of 72
Find out how long it will take your investment to DOUBLE.
Divide 72 by the growth rate of your investment (expressed as a percent).
Example:
How long will it take to double your investment at 10% interest?
72 divided by 10 = 7.2 years
Find out how long it will take your investment to DOUBLE.
Divide 72 by the growth rate of your investment (expressed as a percent).
Example:
How long will it take to double your investment at 10% interest?
72 divided by 10 = 7.2 years
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5. 20/4/10 Rule
If you have to take a loan to buy a car then follow the 20/4/10 rule:
20% - min down payment
4 yrs β max # of years the car should be financed
10% - max amount of your gross income that should be going toward your car
Remember: Most cars depreciate with time.
If you have to take a loan to buy a car then follow the 20/4/10 rule:
20% - min down payment
4 yrs β max # of years the car should be financed
10% - max amount of your gross income that should be going toward your car
Remember: Most cars depreciate with time.
6. 3-6X Emergency Fund Rule
Save 3 to 6 monthsβ worth of your basic monthly living expenses in an emergency saving fund.
Use this money only for emergencies:
- Vet bill
- Flat tire
- Medical bill
Get the biggest bang for your buck with a high-yield savings account.
Save 3 to 6 monthsβ worth of your basic monthly living expenses in an emergency saving fund.
Use this money only for emergencies:
- Vet bill
- Flat tire
- Medical bill
Get the biggest bang for your buck with a high-yield savings account.
7. 5X to 6X Rule
Consider buying term life insurance to protect yourself and your family.
Buy term life insurance worth 5x to 6x your gross annual salary.
Remember to consider your debts, number of kids, etc. to better customize your life insurance needs to your situation.
Consider buying term life insurance to protect yourself and your family.
Buy term life insurance worth 5x to 6x your gross annual salary.
Remember to consider your debts, number of kids, etc. to better customize your life insurance needs to your situation.
Thanks for reading!
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- RT the first tweet
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This account exists to help you build a better financial future.
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