This post has been lying in my draft for a long time now that I fully acknowledge that learning these 11 personal finance rules is much more important when you’re still younger out there. It seriously help you escape some troublesome financial conditions in the coming future.

Therefore, I researched around and myself being learning finance I’ve found some personal rules in the finance world and if you follow those then your 99% of the financial difficulties are brought to ease.

I know the mindset of people when it comes to finance is very simple and wrong.

Understanding & Changing Mindset Towards Money

It is Do The Job —> Save The Money —> Retire.

Before I tell you astonishing things ahead, I will let you answer these questions to yourself in your mind silently and well let’s see if you have satisfying answers.

  1. How much money do you think you’ll be able to save all the way to your retirement?
  2. Do you know that you need to keep emergency funds, & health insurance apart from saving?
  3. How long will you be able to work and save the money you needed to be financially independent? Age 40? 50? 60?
  4. Do you think you can beat the inflation rate of 5-6% per year while just saving in bank accounts?

So, were you able to answer all those and still have the satisfying answers? Well, for most of you, you won’t be satisfied for multiple reasons.

Firstly, the amount you are going to save will be idle in the bank accounts and those bank accounts hardly pays 4-5% interest anyway and mostly it won’t even beat inflation. For those who aren’t taking any interest are just losing money’s value overtime by 5-6% due to inflation.

For being financially independent, you need an amount on which you should be able to spend your lifetime without worrying about a single penny and for that my friend, you seriously need a big number and especially for the younger generation with lot of unnecessary addictions and unplanned expenses.

So to save up this much amount is highly impossible when the money lies in your bank account idle and is not working for you to make money for you.

To make money out of your money, you need to choose forms of investment and make investments. Read more.

Master These 11 Personal Finance Rules To Bloom Your Life Goals

Before getting started, let me tell you that these rules are not my rules but they are made by experts and it is all logical and sensible which you will know further as I discuss about these 11 personal finance rules. I am also not taking any credits for these rules.

Many institutes & experts charge you thousands of dollar to teach you these pretty much the same rules which I am going to provide you for free. Make sure you share this with your friends and family.


1. The Rule of 70

This rule is pretty simple but is the most important rule especially if you’re residing in country like India, where Inflation rate is much higher than other developed countries.

In this rule you can determine how fast the value of your investment gets reduced to half its present value. To determine this, you just need to divide 70 by the current inflation rate.

For example, India has a inflation rate of 6%. Therefore, if I divide 70 by 6, I get 11.67.

So with inflation rate of 6%, my value of money lying idle will become half in 11.67 years.

2. The Rule of 144

This rule determines the number of years you require to quadruple (4x) your money at a given rate. You just have to divide 144 by the interest rate. Hence, the rule of 144.

For example, you open an FD in a bank account @ 4% interest rate. Now, to make your money 4 times, you need to divide 144 by 4. You get 36.

So, your money will becomes 4 times in a period of 36 Years with 4% interest rate.

3. Rule of 114

The rule of 114 is just as same as the above. However, in this rule, you will know the exact time required to triple your money. You will need to divide 114 with the interest rate to get the exact time required to triple your money.

For example, you’re getting an interest rate of 6%. So, 114 divided by 6 is 19. Therefore, to triple your money with 6% interest rate, you need 19 years.

4. Rule of 4% Withdrawal

The rule is pretty simple to understand however might be hard to imply. However, this is a very good rule and works 96% of the time in 25-30 years of time period.

Let’s assume, you have an annual expense of 2,00,000.

Corpus Required To Retire: 25 x Annual Expenses = 50,00,000

Put 50% in fixed income & 50% in equity and then this ruleof 4% for financial freedom comes in play. You need to withdraw 4% every year, i.e, 2,00,000

As simple as that.

5. Rule of Allocation (100 - Age)

As the title says, this rule is used for the asset allocation. This rule will determine how much you should keep your investment into the equities or direct market. Let’s see an example.

I am 21 years old. All I do is subtract my age from 100 which is 100 - 21 = 79.

  • Equity: 79%
  • Debt: 21%

Hope you got an idea on how this works.

6. Rule of 10-5-3

I always says this every newbie getting flabbergasted with stock market and mistake it for unbelievable returns. It is because this rule tells you to have a very reasonable expectations of returns. Let’s see how,

  • 10% - Rate of Return for Equity/Mutual Funds
  • 5% - Rate of Return for Debts (i.e, Fixed Deposits or Other Debt Instruments)
  • 3% - Savings Account Interest

Disclaimer: Please note that, this is by far the most reasonable. If you can achieve more, then its fine. You can take this rule as per your opinion. But for newbies, I highly suggest to stick with this number and most of time these are the returns you get.

7. Rule of 50-30-20

By far one of my favorite rule and has been following this since which make me save more than I ever thought I can. This rule is super simple and you can easily apply if you take a little time of yours and apply this in your real life.

The rule here is to divide your income into several parts, i.e,

  • 50% - Your Needs such as Groceries, EMIs, Rents, Bills, etc.
  • 30% - Your wants such as Subscriptions of Netflix, Prime, Vacations, etc.
  • 20% - Your savings such as Equity, FD, Saving A/C, Debt. Mutual Funds, etc.

At the least try to do this number or you can also go for, 50-40-10 but it would be good if you could save at least 20% of your income. You can even further increase saving and save even more definitely.

8. Rule of 3X Emergency

As the title implies, you need to put away 3 times your monthly income in Emergency Funds for any emergency that might happens anytime like Loss of Employment, Medical Emergency, etc.

To be on much safer side, you should have at least 6x Monthly Income.

9. Rule of 40% EMI

This is very important to stay out of debt trap. Never ever go beyond 40% of your income into EMI’s. This is the rule. Very simple yet extremely effective. Let’s see an example,

If my monthly income is 60,000 then my EMIs should not exceed 24,000.

This rule is usually used by Finance Companies to provide you with loans but you can hop in to use it as well to manage the debt traps like a pro.

10. Rule of Life Insurance

This rule is to have sum assured as much as 20 times your Annual Income. 20x Annual Income. Let’s suppose, you earn 10 lakhs annually then you should have 2 crore insurance by following this rule.

11. Rule of 20-4-10 (Buying A Car)

One of the rule which is crucial and should be understood. The rule of buying a car is simple. It determines on how exactly you should decide the budget while buying a car.

  • 20% - For Down Payment
  • 4 Years - The loan tenure should not exceed 4 years
  • 10% - The car monthly expenses should not exceed 10% of your monthly income

Generally, I prefer to follow a thumb rule while buying a car. The total price of the car you’re going to purchase should not be greater than the half of your annual income.

For example, my annual income is 10 Lakhs then I should buy a car that comes in a budget of 5 lakhs. Simple yet effective.

Wrapping Up

So these are the 11 personal finance rules you can apply in your real life and yes you will be amazed that you are able to get financially independent or able to save more or much more. However, these rules will protect you from going into debt traps or get broken at any point in life.

Life is always full of up and downs and therefore, you should always have a way to outsmart the life down’s with the help of up’s you have. Hope you like these rules, if you do, please share with your family and friends and also stay tuned for more such articles in the future.