Rules Of Money (QUICK READ) 💰
Money is Honey, isn't it?
1. Rule of 72 (Doubling Your Money) 💸
This rule helps you determine the number of years required to double your money at a given interest rate. Simply divide 72 by the interest rate to find out. For example, if the interest rate is 8%, it will take approximately 9 years to double your money.
2. Rule of 114 (Tripling Your Money) 💸
Similar to the Rule of 72, this rule calculates the number of years needed to triple your money. Divide 114 by the interest rate to get the answer. For instance, at a 12% interest rate, it would take about 9.5 years to triple your money.
3. Rule of 144 (Quadrupling Your Money) 💸
This rule determines how many years it takes to quadruple your money at a given interest rate. Divide 144 by the interest rate to find out. For example, at a 12% interest rate, it would take approximately 12 years to quadruple your money.
4. Rule of 70 (Inflation)
Divide 70 by the current inflation rate to estimate how long it will take for the value of your investment to halve. For instance, with a 7% inflation rate, your money's value will reduce by half in approximately 10 years.
5. 50-30-20 Rule (Income Allocation)
This rule suggests dividing your income into three categories:
50% for Needs (e.g., groceries, rent, EMIs)
30% for Wants (e.g., entertainment, vacations)
20% for Savings (e.g., investments in equity, mutual funds, fixed deposits)
Strive to save at least 20% of your income, and aim to save more whenever possible.
6. 3X Emergency Rule
Always keep at least three times your monthly income in emergency funds to cover unexpected expenses like job loss or medical emergencies. Ideally, aim for around six times your monthly income for added security.
7. 40% EMI Rule
Limit your monthly EMIs (Equated Monthly Installments) to no more than 40% of your monthly income. For example, if you earn ₹50,000 per month, ensure your total EMIs do not exceed ₹20,000. This guideline helps manage your finances prudently and is often used by financial institutions when evaluating loan eligibility.