Thread by Kenny | Accent Investing
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- Dec 29, 2022
- #Finance #Personalfinance
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By the age of 30, you need to know these financial rules if you want to be in control of your finances:
• Rule of 72
It calculates the number of years it takes your money to double, given a rate of return.
You just need to divide 72 by the rate of return.
If your investment returns 8%, it will take 9 years for your money to double (72/8 = 9).
It calculates the number of years it takes your money to double, given a rate of return.
You just need to divide 72 by the rate of return.
If your investment returns 8%, it will take 9 years for your money to double (72/8 = 9).
• 4% withdrawal rule
This is used to calculate your retirement number.
If you said that you would retire with an annual income of $60,000, divide your annual income by 4%.
In this case, you need to save $1.5 million.
This is used to calculate your retirement number.
If you said that you would retire with an annual income of $60,000, divide your annual income by 4%.
In this case, you need to save $1.5 million.
• Pay yourself first
This is a rule that incentivizes you to save money for your future rather than spending it today.
Before you spend any money, pay yourself by investing in your retirement and savings accounts.
This is a rule that incentivizes you to save money for your future rather than spending it today.
Before you spend any money, pay yourself by investing in your retirement and savings accounts.
• Rule of 114
It calculates the number of years it takes your money to triple, given a rate of return.
An investment growing at 6% will triple in about 19 years (114/6 = 19).
It calculates the number of years it takes your money to triple, given a rate of return.
An investment growing at 6% will triple in about 19 years (114/6 = 19).
• The 50/30/20 rule
This is a rule for budgeting.
50% of your income should go toward meeting your needs, such as rent, utilities, and food.
30% for wants such as dining, entertainment, and leisure.
20% for financial goals, such as paying off debt or saving for retirement.
This is a rule for budgeting.
50% of your income should go toward meeting your needs, such as rent, utilities, and food.
30% for wants such as dining, entertainment, and leisure.
20% for financial goals, such as paying off debt or saving for retirement.
• Rule of 144
It calculates the number of years it takes your money to quadruple, given a rate of return.
An investment growing at 9% will quadruple in 16 years (144/9=16).
It calculates the number of years it takes your money to quadruple, given a rate of return.
An investment growing at 9% will quadruple in 16 years (144/9=16).
• 10-5-3 Rule
This rule tells you how different asset classes give you different types of returns.
• Equity / Mutual funds: returns expected to be about 10%.
• Debt : returns expected to be about 5%.
• Savings : returns are expected to be about 3%.
This rule tells you how different asset classes give you different types of returns.
• Equity / Mutual funds: returns expected to be about 10%.
• Debt : returns expected to be about 5%.
• Savings : returns are expected to be about 3%.
• 100 minus your age rule
This rule is used for asset allocation.
Subtract your age from 100 to know the equity vs. bond allocation.
Age 20: Equity: 80%, Bonds: 20%
Age 30: Equity: 70%, Bonds: 30%
Some people use 110 or 120 to be more aggressive in their allocation.
This rule is used for asset allocation.
Subtract your age from 100 to know the equity vs. bond allocation.
Age 20: Equity: 80%, Bonds: 20%
Age 30: Equity: 70%, Bonds: 30%
Some people use 110 or 120 to be more aggressive in their allocation.
• Rule of 70
Divide 70 by the rate of inflation to determine how quickly the value of your investment or money will be reduced by half.
For instance, if the inflation rate is 7%, it will take 10 years to reduce the value of your money by half (70/7 =10).
Divide 70 by the rate of inflation to determine how quickly the value of your investment or money will be reduced by half.
For instance, if the inflation rate is 7%, it will take 10 years to reduce the value of your money by half (70/7 =10).
• 40% EMI rule
This rule applies when a person is borrowing money.
It states that a person's monthly income should not go toward their EMI (equated monthly installment).
For instance, if you make $2,000/month, you should have less than $800 of EMI.
This rule applies when a person is borrowing money.
It states that a person's monthly income should not go toward their EMI (equated monthly installment).
For instance, if you make $2,000/month, you should have less than $800 of EMI.
• Emergency fund Rule
This rule states that one should have at least three months of their monthly expenses in an emergency fund.
3x the monthly expenses should be saved.
Some experts recommend saving 6x your monthly expenses.
This rule states that one should have at least three months of their monthly expenses in an emergency fund.
3x the monthly expenses should be saved.
Some experts recommend saving 6x your monthly expenses.
• The 20/4/10 rule
This is used if you finance a car.
• Put at least 20% down.
• Pay off the car in no more than 4 years.
• Spend no more than 10% of your gross monthly salary on car expenses.
This is used if you finance a car.
• Put at least 20% down.
• Pay off the car in no more than 4 years.
• Spend no more than 10% of your gross monthly salary on car expenses.
• Annual savings for retirement
This helps you determine if you have saved enough for retirement.
• By age 30: 1x of your annual salary
• By age 35: 2x
• By age 40: 3x
• By age 45: 4x
• By age 50: 6x
• By age 55: 7x
• By age 60: 8x
This helps you determine if you have saved enough for retirement.
• By age 30: 1x of your annual salary
• By age 35: 2x
• By age 40: 3x
• By age 45: 4x
• By age 50: 6x
• By age 55: 7x
• By age 60: 8x
• Purchase a house
Do not purchase a home that is more than 2.5 to 3 times your gross annual income.
So, if you earn $50,000 per year, you should not spend more than $150,000 on a home.
Do not purchase a home that is more than 2.5 to 3 times your gross annual income.
So, if you earn $50,000 per year, you should not spend more than $150,000 on a home.
• Savings for retirement 10-20%
This rule states that because of inflation and rising living costs, it is best to save 10–20% of your income for retirement.
This rule states that because of inflation and rising living costs, it is best to save 10–20% of your income for retirement.
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• Personal Finance
• Investing
• Wealth
Follow me @AccentInvesting for more tips.
Subscribe to receive a free guide on the top 5 ETFs to hold for life: bit.ly/AccentInvesting
