19 Money Rules You Should Learn By 25

Rules

1. Pay yourself first

As soon as you get paid, put money into savings. Automating this is even better.

2. Keep a 6-month emergency fund.

If you have multiple streams of incomes, you an go as low as 3 months.

If stating out on your own, you could need as much as 12 months.

3. Budget using the 50 / 30 / 20 rule.

  • 50% for needs
  • 30% for wants
  • 20% towards saving/investing

This is the bare minimum!

4. Divide your bonus into thirds

  • 1/3 for fun
  • 1/3 for retirement
  • 1/3 for debt paydown (add to retirement if only low-interest debt)

5. Pull all, or large percentage, of your raises into savings and investings

This helps avoids lifestyle inflation and moves up your retirement date.

6. Avoid high-interest debt

If you have any, use the avalanche or snowball method to pay it off.

7. Always take an employer 401K match

Many employers will match a percentage of your paycheck.

This money is getting an immediate 100% return.

If you turn this down, it;s the same as turning down a raise.

8. Your home payment

Mortage interest insurance should cost less than 25% of your monthly income.

9. When buying a car use the 20 / 4 / 10 Rule if you have it

  • 20% down payment
  • 4 years loan
  • < 10 % of your monthly income

You can also go to buy older vehicles with cash.

10. You should save at least 15%

Save at least 15% of the income for the retirement.

11. Your age subtracted from 100

It represents the percentage of stocks you have in your portfolio.

12. The stock market

It has a long term average return of 10%

To calculate your returns, it’s common to use 6-8% to capture the effect of inflation.

13. The rule of 72

It tells you how long it will take your investment to double

Example: The stock market returns 10%, so 72 / 10 = 7.2 years to double your money

14. The 4 % rule

It says you can safely withdraw 4% of your starting investment balance each year (adjust for inflation in subsequent years) and not run out of money.

15. Your Net Worth

It should be equal to your age X pre tax income / 10

Example: If you are 35 years old and Rs. 20,00,000 in annual income, then your net worth should be Rs. 70,00,000 (35 x 20,00,000 / 10).

16. Have at least five times

You should have atleast 5x your gross salary in term life insurance.

17. Before spending money

You should wait 24 hours and ask, do I still want it? If you do, go ahead and buy it. This will save you from a lot of impulse purchases.

18. Save for retirement first

First save for your retirement, then your children’s education.

19 Value Time

Value time over money and experience over things.

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