Financial freedom is a coveted goal for many, but it seems like an unattainable dream for those who are not born with a silver spoon in their mouth. However, financial experts believe that proper planning and discipline are the keys to achieving financial freedom. In this article, we will delve into the world of personal finance and explore some simple yet powerful rules that can help you unlock your financial potential.
“The way to get started is to quit talking and begin doing.” – Walt Disney
The 15*15*15 Rule is one such rule that can help you accumulate ₹1 crore in just 15 years. The rule states that you need to save ₹15,000 a month for 15 years continuously, without any single default in monthly savings, in a 15% CAGR generating mutual fund. If you continue the same for another 15 years, you would have saved a whopping ₹10.5 crore. The magic lies in compounding and consistency is the key.
- Save ₹15,000 a month for 15 years in a 15% CAGR generating mutual fund.
- Continue the same for another 15 years to accumulate ₹10.5 crore.
The Rule of 72 is another simple yet powerful tool that can help you calculate the ideal rate of return for your investment. To find the number of years it will take for your investment to double, just divide 72 by the interest rate you will receive on your investment. For instance, if you receive 6% interest per annum, money doubles in just 12 years (72/6).
- Divide 72 by the interest rate to find the number of years for investment to double.
- For example, if you receive 6% interest per annum, money doubles in 12 years.
The Rule of 114 is similar to the Rule of 72, but it tells you when your investment triples. Just divide 114 by the annual interest rate received to find out how many years you need for wealth to grow threefold. If interest per annum is 6%, money triples in 19 years (114/6).
- Divide 114 by the annual interest rate to find the number of years for investment to triple.
- For example, if interest per annum is 6%, money triples in 19 years.
The Rule of 144 is another useful tool that can help you calculate the ideal rate of return for your investment. It tells you when your investment quadruples in value — just a simple division.
- Divide 144 by the interest rate to find the number of years for investment to quadruple.
The 50/30/20 Rule is a simple and effective way to budget your finances. Divide your net-income (after tax deductions) into three major categories: 50% for essentials such as rent or housing EMI, groceries, medicines, utilities etc.; 30% for wishes such as entertainment, tour, shopping etc. and balance 20% for savings and debt repayment.
| Essentials | 50% |
| Wishes | 30% |
| Savings and debt repayment | 20% |
The 100 Minus Age Rule is a fundamental principle in personal finance that can help you determine the percentage of equity portfolio to allocate to risky assets such as stock markets. As per this rule, one must subtract his/her age from 100 to determine the percentage of equity portfolio, and the rest allocated to low-risk assets or traditional fixed/recurring deposits.
- Subtract your age from 100 to determine the percentage of equity portfolio.
- For example, if you are 30, 70% (100–30) of your investment can be in equities, and 30% in bonds, FDs, or other debt funds.
The 10X Insurance Rule is a simple yet powerful tool that can help you calculate the amount of life cover your dependents would require in your absence. As per this rule, the term life insurance cover should at least be 10 times your gross annual income.
- Calculate the term life insurance cover by multiplying your gross annual income by 10.
While these number-based thumb rules are shortcuts to crack the code of complicated personal finance decisions, one size doesn’t fit all. Therefore, it is essential to take care while making important financial decisions. “The best way to get started is to quit talking and begin doing.” – Walt Disney. It is time to take control of your finances and unlock your financial potential. Start by implementing these simple yet powerful rules in your daily life and watch your finances transform into a powerful tool for achieving financial freedom.
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