10 Personal Finance rules millennials should follow

The term ‘Personal Finance’ has become a buzzword in today’s times, with a lot of people using it frequently with respect to their individual or family’s expenditure and savings. 

Millennials, especially, need to monitor their finances in order to thrive in the world of competition and uncertainty. 

1. Use Rule of 72 to know the time period needed to double your income

In order to know the number of years required to double your money, you need to divide the number 72 by the annual interest rate 

2. Apply Rule of 70 to check the depreciation rate of your investment

You can divide 70 by the current inflation rate to calculate how fast the value of your investment will get reduced to half of its present day value.  

3. Put 50% of income into fixed income & 50% into equity

4. Stock Allocation Rule – 100 minus your age rule

subtract your age from 100 to find out how much of your portfolio should be allocated to equities. Suppose your Age is 30 so (100 – 30 = 70) Equity : 70% Debt : 30%

5. Asset Allocation Rule – 10-5-3 Rule

The asset allocation or 10-5-3 rule says that annual return on stocks is likely to be 10%, the return rate of bonds is 5% and cash (as well as liquid cash-like investments) is 3%. 

6. 50-30-20 Rule – about allocation of income to expense

50℅  of your earnings should be dedicated to your needs (Groceries, rent, emi,etc)  30℅ of your salary should be allocated for your wants and desires (Entertainment, vacations, etc)  20℅ of your remunerations should be kept aside for your savings (Equity, MFs, Debt, FD, etc).

7.3X Emergency Rule

8. 40℅ EMI Rule - people should never cross the limit of investing 40℅ of their income into EMIs.  

9. Life Insurance Rule can also be used to regulate personal finance. To evaluate the minimum sum assured in term life insurance, the best way to calculate is 10 times the annual income