07/06/2021
*Financial Planning's basics - Brush Up*
Rule of 72 (Double Your Money)
Rule of 114 (Triple)
Rule of 144 (Quadruple)
Rule of 70 (Inflation)
4% Withdrawal Rule
100 - Minus Age Rule
10, 5, 3 Rule
50-30-20 Rule
3X Emergency Rule
40℅ EMI Rule
Life Insurance Rule
*Rule of 72*
No. of yrs required to double your money at a given rate, U just divide 72 by interest rate
Eg, if you want to know how long it will take to double your money at 8% interest, divide 72 by 8 and get 9 yrs
At 6% rate, it will take 12 yrs
At 9% rate, it will take 8 yrs
*Rule of 114*
No. of years required to triple your money at a given rate, U just divide 114 by interest rate.
For example, if you want to know how long it will take to triple your money at 12% interest, divide 114 by 12 and get 9.5 years
At 6% interest rate, it will take 19yrs
*Rule of 144*
No. of years required to quadruple your money at a given rate, U just divide 144 by interest rate.
For eg, if you want to know how long it will take to quadruple your money at 12% interest, divide 144 by 12 and get 12 yrs.
At 6% interest rate, it will take 24yrs
*Rule of 70*
Divide 70 by current inflation rate to know how fast the value of your investment will get reduced to half its present value.
Inflation rate of 7% will reduce the value of your money to half in 10 years.
*4% Rule for Financial Freedom*
Corpus Reqd- 25*Annual Expenses
Eg- annual expense is 500,000 then corpus required to retire is 1.25 cr.
Put 50% into fixed income & 50% into equity.
Withdraw 4% every yr, i.e.5 lac.
This rule works for 96% of time in 30 yr period
*100 minus your age rule*
This rule is used for asset allocation. Subtract your age from 100 to find out, how much of your portfolio should be allocated to equities
Age 30
Equity : 70%
Debt : 30%
Age 60
Equity : 40%
Debt : 60%
*10-5-3 Rule*
One should have reasonable returns expectations
10℅ Rate of return - Equity / Mutual Funds
5℅ - Debts ( Fixed Deposits or Other Debt instruments)
3℅ - Savings Account
*50-30-20 Rule - Allocation*
Divide your income into
50℅ - Needs - Groceries, rent, emi
30℅ - Wants - Entertainment, vacations, etc
20℅ - Savings - Equity, MFs, Debt, FD, etc
Atleast try to save 20℅ of your income.
You can definitely save more
*3X Emergency Rule*
Always put atleast 3 times your monthly income in Emergency funds for emergencies such as Loss of employment, medical emergency, etc.
3 X Monthly Income
You can have around 6 X Monthly Income to be on a safer side
*40℅ EMI Rule*
Never go beyond 40℅ of your income into EMIs.
Say you earn, 50,000 per month. So you should not have EMIs more than 20,000 .
This Rule is generally used by Finance companies to provide loans. You can use it to manage your finances.
*Life Insurance Rule *
Always have Sum Assured as 20 times of your Annual Income
20 X Annual Income
Say you earn 5 Lacs annually, u shud atleast have 1 crore insurance by following this Rule
