Money Saving Tips: Earning money has become easier than ever before, yet most people still wonder at the end of the month where their salary went. With increasing income, expenses are also rising, and savings are falling behind. Financial experts believe the problem isn’t low income, but rather poor financial planning. If you understand some essential personal finance rules, you can improve your financial situation without increasing your income.
Read More- Sarson Ka Saag Recipe – Make Delicious Sarson Saag Recipe to Win Your Family’s Heart
Understand the Rule of 72
The Rule of 72 is a simple mathematical formula that tells you how many years it will take for your investment to double. You simply divide 72 by your investment’s annual interest rate. This makes it easy to understand which investment can grow your money faster.
Learn about the Rule of 70
The Rule of 70 explains how inflation gradually reduces the value of your money. If the inflation rate is 7 percent, the purchasing power of your money can be halved in about 10 years. This is why simply keeping money in a savings account can be detrimental in the long run.
Retirement Planning is Essential
To avoid a shortage of money after retirement, the 4 percent withdrawal rule is considered very important. According to this rule, you should spend only 4 percent of your total savings each year after retirement. This ensures your savings last for a long time.
Invest According to Your Age
As you get older, it becomes necessary to reduce the risk in your investments. The 100 minus age rule suggests that you should invest a percentage of your money equal to 100 minus your age in risky investments like equities. It’s wise to keep the remaining amount in safer options.
Understand the 10-5-3 Rule
Many investors expect very high returns. The 10-5-3 rule dispels this misconception. According to this, an average return of 10 percent can be expected from equity, 5 percent from debt instruments, and approximately 3 percent from savings accounts.
Balancing Expenses with the 50-30-20 Rule
The 50-30-20 rule helps balance expenses and savings. According to this rule, 50 percent of your income should go towards essential expenses, 30 percent towards lifestyle and hobbies, and at least 20 percent towards savings or investments.
The 6X Emergency Fund Rule
An emergency fund equivalent to six months’ worth of expenses is crucial to handle unexpected situations like job loss or medical emergencies. This means you should have enough money saved to cover at least six months of your expenses.
Read More- Top 5 safest cars in India – Vehicles with a 5-Star Global NCAP rating
Keeping EMIs Under Control
The biggest mistake when taking out a loan is taking on excessive EMIs (Equated Monthly Installments). The 40 percent EMI rule states that your total monthly EMIs should not exceed 40 percent of your income to avoid financial strain.
The Life Insurance Rule
According to financial experts, your life insurance coverage should be 10 to 15 times your annual income. This ensures your family’s financial security in the event of your death.
Earning money is as important as managing it correctly. If these nine personal finance rules are adopted in time, you can relieve yourself of both fear and stress related to money in the future.