**Learn 10 Personal Finance Rules that everyone should follow to regulate and control their personal finances**. Get ready for a journey that can help you manage your money better and make your future brighter. In a world where money stuff can be confusing, understanding the basics of personal finance is like having a map to figure things out. Whether you’re at the beginning of your financial adventure or aiming to improve your current approaches, this blog is the resource to turn to for unravelling the principles that guide financial success.

**10 Personal Finance Rules for Better Financial Decisions**

### 1.** Rule of 72**

When we invest in fixed income schemes, mutual funds, money-back plans and similar financial instrument, the primary thought that often crosses our minds is when our money will double. So, this **rule of 72** will help us to estimates the number of years it takes to double your money at a specified rate of return.

To use the rule of 72, you divide 72 by the annual rate of return. The result provides an approximation of the number of years required for your investment to double.

For example:If you have an investment with a 6% annual rate of return, you can apply the rule of 72 by dividing 72 by 6. The result is 12, indicating that it would take approximately 12 years for your investment to double at a 6% annual rate of return. This rule gives the best result when the interest rate in between 6% – 10%.

### 2.** 100 Minus Age Rule**

According to this rule, you should subtract your age from 100 and allocate that percentage of your portfolio to investments in stocks and the remaining should be invested in more stable investments like bonds.

For instance :If you’re 40 years old, the rule suggests having around 60% (100 – 40) of your portfolio in stocks and the remaining 40% in bonds or other less risk investments.

It’s crucial to understand that the **“100 Minus Age Rule”** is a general guideline and may not be suitable for everyone’s unique need hence one’s approach should be as per their personal liabilities, loans and goals.

### 3.** 50/30/20 Rule: **

It is a well-known rule for budgeting. As per this rule you should divide your after-tax income into 3 parts:

**50% on Needs**(pay your rents, bills, groceries and other utilities)**30% on Wants**(shopping, vacation, party, hobbies and self-wellness)**20% on Savings and Debt Repayment**(Retirement, investments, creating emergency funds)

Example: Let’s understand the “50-30-20 Rule” using a hypothetical monthly income of $3,000:

50% for Needs ($1,500):This portion covers mandatory expenses.Rent or Mortgage: $800

Utilities: $100

Groceries: $300

Transportation: $300

30% for Wants ($900):This category is for Non – essential spending.Dining Out: $200

Entertainment: $100

Shopping: $200

Miscellaneous: $400

20% for Savings and Debt Repayment ($600):Emergency Fund: $200

Retirement Savings: $200

Debt Repayment: $200

### 4.** 6X Emergency Rule**

According to this rule one should keep minimum 6 times of your current monthly expense as emergency fund. These reserves can be kept in saving account (using auto sweep _ to gain more interest rate) or any other easily accessible liquid assets platform.

Let’s consider an example to understand this. If your monthly expenses amount is $3,000, the 6x emergency fund would be calculated as follows: $3,000 (monthly expenses) x 6 = $18,000

According to the **6x emergency rule**, you should have an emergency fund of $18,000. This fund acts as a financial safety net, providing you with enough resources to cover living expenses for approximately six months in case of unexpected situations like job loss, medical emergencies, or unforeseen expenses.

### 5.** 20X Insurance Rule**

As per this rule one should take life insurance which covers twenty times of your current salary.

Let’s consider an example to understand this. If your current annual salary is $50,000, the 20x insurance rule would suggest obtaining life insurance coverage of: $50,000 (annual salary) x 20 = $1,000,000

According to the **20x insurance rule**, you would aim to have life insurance coverage of $1,000,000.

**6. ** **40% EMI Rule**

As per this rule,** **the combined EMIs (Equated Monthly Installments) for all your loans should not surpass 40% of your income.

Let’s consider an example to understand this. If your current monthly income is $3,000, so as per the rule your EMIs including (Home loan, Car Loan and personal loans etc) should not exceed $1,200 (40% of $3000).

### 7. **25X Retirement Rule**

This rule assists us in calculating the amount of money needed to save for retirement. According to this rule, you should keep 25 times of your yearly expense in the saving account by the time of your retirement. You can withdraw approx. 4% of your savings (as interest) annually in retirement to maintain a sustainable income throughout your retirement years.

Let’s assume you’ll need $40,000 per year to cover your living expenses in retirement. According to the 25X retirement rule, you would aim to have 25 times this annual expense saved: $40,000 (annual expenses) x 25 = $1,000,000

So, based on the 25X rule, you would aim to have $1,000,000 in savings by the time you retire. This assumes that withdrawing 4% of this amount each year, or $40,000 (4% of $1,000,000), should provide a sustainable income throughout your retirement years.

**Note**: This rule fits better when the person retires around 60 years.

### 8. ** 1**^{st} Week Rule

^{st}Week Rule

As per this rule one should invest first and spend later. It involves dedicating part of your income to investments during the first week of the month, while the rest is allocated for expenses.

For example: If an individual receives their salary on the 1

^{st}of each month, they should start Systematic Investment Plan (SIP) starting from 1st or 2^{nd}on the month.

### 9. ** 3*3*3 Investment Plan**

As per this plan, we should first invest in 3 essentials things (**Health Insurance, Life Insurance and Emergency funds**) and then 3 personalized or need based things (**Debt prepayment, retirement planning like National Pension Scheme, Sovereign Gold Bonds**) and then comes 3 investments such as **Real Estate, Stocks, Mutual Funds **

### 10. **Rule of 114**

Similar to the rule of 72, this rule will help you calculate how many years it will take to make your money triple.

To use the rule of 114, you divide 114 by the annual rate of return. The result provides an approximation of the number of years required for your investment to triple.

Let us assume that we have an investment with an annual rate of return of 6% then,

**Years to Triple=114 / Annual Rate of Return**

For an annual rate of return of 6%: Years to Triple = 114/6 ≈ 19

So, according to the Rule of 114, it would take approximately 19 years for your money to triple with a 6% annual rate of return.

The above 10 personal finance rules are a must for millennials to follow to make their financial journey hassle-free. Learn more about such finance-related topics with FinanceWisdom4U. Learn more on wealth creation tips and financial freedom technique.