Ten Thumb Rules for Smart Financial Plan

In life people want  shortcuts, that’s the reason thumb rules find some place & help in financial decisions..............

1. Saving and investing rules of thumb: – What should be my asset allocation? 100 minus Your age should be your equity allocation
2. How much emergency fund? 1)Government job -3 months. 2)Private job/ profession – 6 months expenses
3. Retirement rules of thumb - How much corpus required? 1)Minimum 20 times of your yearly income.
4. How much to invest monthly? 1)Indians were great savers. New generation is different, they like to enjoy. Minimum 20 % to 40% should be saved.
5. Insurance thumb rule - 8 to 10 times of your yearly income and above age 50 take 6 to 8 times.
6. Cost of house :- Rules of thumb - How big should be my house? 1)Equal to 2 to 3 times of your family annual income.
7. Maximum EMI that I can have? 1)Zero will be the best answer, shouldn’t be more than 35% of gross monthly income even lesser close to retirement. 
8. Rate of return on investment- Ideally should beat inflation. 
9. Rule of 72 & 115 – How many years double or triple our money. 1)72 / Return=double in yr. 115 / return = triple in yr
10. Rule of 70 – Future buying power of your money- 1)Divide 70 with current inflation to know how fast your value of money will be reduced. For eg. If inflation is 7% then 70/7= 10 yrs. In 10 yrs our purchasing power reduces to half.

FINANZINDIA