Examples of Financial Rules of Thumb Save at least 10-15% of your take-home income for retirement. Have at least five times your gross salary in life insurance death benefit. Pay off your highest-interest credit cards first. The stock market has a long-term average return of 10%.

What is a good rule of thumb for saving money?

Here’s a final rule of thumb you can consider: at least 20% of your income should go towards savings. More is fine; less may mean saving longer. At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items.

What’s the best rule of thumb for financial planning?

As a rule of thumb I would say not exceeding 40% of your monthly income assuming this includes home loan EMIs. In an ideal scenario zero EMI would be a better option. Today its important to use some financing or debt in a moderate fashion to achieve your goals or to meet certain needs.

Why are financial rules of thumb so important?

Financial rules of thumb provide helpful shortcuts for making quick calculations and decisions. You don’t always have time (or want to take the time) to create elaborate spreadsheets when choosing a course of action. In these cases, it’s nice to have some rough guidelines you can rely on. You’ve probably heard of the “rule of 72”, for example.

What’s the rule of thumb for making money?

If your savings account yields 4%, say, it will take about 18 years for your nest egg to increase by 100%. But if you were able to earn 12% on your investment, that money would double in six years. Like all rules of thumb, the rule of 72 isn’t precise. It doesn’t give an exact answer but a ballpark figure.

Which is the best rule of thumb for retirement?

Based on the previous rule of thumb, there’s a quick way to check whether early retirement is within your reach. Multiply your current annual expenses by 25. If the result is less than your savings, you’ve achieved financial independence — you can retire early.