2. The Emergency Fund Rule: Put away at least 3-6 months worth of expenses in a liquid savings account to ensure it is available at short notice.
3. 4% Withdrawal Rule: How much should I withdraw during retirement? We often use the 4% rule to protect principle and determine how much one can take from the retirement savings.
4. Rule of 72: This tells you in how much time will your money double. Divide 72 by the interest rate you are compounding your money with and you will arrive at the number of years it will take to double in value.
5. Rule of 70: This is a useful rule for predicting your future buying power. Divide 70 by the current inflation rate to know how fast will the value of your investment get reduced to half its present value. This is especially useful for retirement planning, as it affects the way you set up your monthly withdrawals. However, do remember that the inflation rate varies from time to time.
6. Pay Yourself First Rule: Right from your first salary, put away a little for your retirement. Experts say 10% of your income should go into this. It is important to increase the amount as your income rises over the years.
7. Rule of 114: Use this to estimate how long will it take to triple your money. It works the same way as the rule of 72. Divide 114 by the interest rate to know in how many years will Rs. 10,000 become Rs. 30,000.
8. 100 Minus Your Age Rule: This rule is used for asset allocation. Subtract your age from 100 to find how much your portfolio should be already located to equities.
9. Rule of 144: Similarly, this tells you in how much time will your investment quadruple in value. For instance, if the interest rate is 12%, Rs. 10,000 becomes Rs. 40,000 in 12 years.
Source: The Economic Times - Wealth.
Thank you,
Minita Aiya
Client Service Associate
DENIP Consultants Pvt. Ltd.
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