10 Personal Finance Rules Every Person Should Know

Rule of 72 – Double Your Money

The Rule of 72 estimates how long it takes to double your investment. Divide 72 by the annual interest rate. At 6%, your money doubles in 12 years (72 ÷ 6 = 12).

Rule of 70 – Inflation’s Impact

How long will it take for inflation to halve your money's value? Use the Rule of 70: divide 70 by the inflation rate. At 2%, money halves in 35 years (70 ÷ 2 = 35).

4% Withdrawal Rule for Retirees

The 4% Rule guides retirees on annual withdrawals to sustain savings for 30+ years. Example: With $1M saved, withdraw $40,000 the first year, adjusting for inflation annually.

The 100 Minus Age Rule

Allocate your investments based on age. Subtract your age from 100 to determine the stock percentage. A 30-year-old invests 70% in stocks and 30% in bonds.

10-5-3 Rule for Investment Returns

The 10-5-3 Rule provides expected annual returns: – Stocks: ~10% – Bonds: ~5% – Savings: ~3% These are historical averages and may vary.

Budgeting Simplified – The 50-30-20 Rule

Organize your income wisely: – 50% for needs (housing, food) – 30% for wants (entertainment) – 20% for savings or debt repayment. This ensures financial stability.

3X Emergency Rule

Save for unexpected expenses by building an emergency fund of 3–6 months’ living costs. If monthly expenses are $2,000, aim for $6,000–$12,000 in savings.

The 40% EMI Rule

Control debt with this rule: ensure your Equated Monthly Installments (EMIs) don’t exceed 40% of your income. Example: On $5,000 income, keep EMIs under $2,000.

Life Insurance Rule

Ensure dependents’ security with life insurance coverage 10–15 times your annual income. For $50,000 income, opt for $500,000–$750,000 coverage.

Rule of 144 – Long-Term Growth

If investments double every 12 years, they grow 144 times over 72 years. This rule highlights the power of compound interest in long-term planning.