10 Golden Rules of Personal Finance for Beginners

10 Golden Rules of Personal Finance for Beginners

Starting your carrier in any field or as a beginner these 10 Golden Rules of Personal Finance will be very important as earning well and securing investments.

Financial planning or Personal Finance is the procedure, which provides you with a framework for achieving your life goals in a systematic and planned way by avoiding frights and surprises. It comes with goals, such as determining capital requirements, framing financial policies, and ensuring that the insufficient financial resources are utilised the best possible way.

Instilling the habit of financial planning in young adults is a difficult job. However, when they volunteer to plan their finances, one wouldn’t know where and how to start. Here are 10 Golden Rules of Personal Finance for Beginners that one must follow to plan their finances well.

10 Golden Rules of Personal Finance

50-30-20 rule

This 1st rule is about the allocation of income to expenses and investments.

50% – Needs (Basic requirements, Rent, Financial Liabilities)

30% – Wants (Vacation, important expenses, entertainment)

20%- Savings (Equity, Mutual Funds, Bonds, Gold etc.)

The savings frame can always be increased to maximise wealth. Also, one should start saving early and get the advantages of compounding.

10-5-3 rule

This 10-5-3 rule helps you set reasonable anticipations regarding returns from various investments made for the long term.

10% Returns – Equity/Mutual Funds

5% – Debts (Fixed Deposits, could be negligibly higher for other debt instruments such as bonds)

3% – Savings Account on emergency fund or saving

Follow this 10-5-3 rule in accord with the 100 minus your age rule and invest accordingly in inequities to increase overall returns.

100 minus your age rule

Equity markets can be volatile and are primarily appropriate for investors eyeing a high return for high risks. This rule is recommended for the asset allocation of a portfolio. Subtract your age from 100 to authenticate how much of your savings should be allocated to equities.

Example – If your age is 30 so 100 – 30 = 70% of your savings should be invested in Equities and Equity related mechanisms like Equity Mutual Funds.  Contrariwise, somebody whose age is 70, should invest only 30% of his portfolio in Equities and Equity related mechanisms like Equity Mutual Funds.

Needless to say, this is a thumb rule and may not involve to professional investors.

Rule of 72

Want to understand in how many years your investment will be doubled? Divide 72 by your rate of returns; that’s the numeral of years your investment need to double your returns.

For Instance– On a 12% rate of return, your investment will be doubled in (72/12) = 6 years.

Also, at an 8% rate of returns, your investment will be doubled in (72/8)= 9 years. 

Rule of 144

This rule of 144 is similar to the rule of 72. To understand how many years your investment will be tripled, divide 144 by your rate of returns; that’s the number of years.

For Example – On a 12% rate of return, your investment will be doubled in (144/12) = 12 years.

If you invested a total amount of 1 lakh at 12% return, it would be 3 lakhs in 12 years, 9 lakhs in 24 years and 27 lakhs in 36 years.

Rule of 70

Rule of 70 estimates the suitable estimate of your fewer wealth due to inflation a few years down the line.

Dividing 70 by the estimated long term inflation rate signifies in how many years your wealth will be reduced to half its value. It assumes inflation of 7% for only 10 years to reduce your wealth to half its value.

For instance– in India, the long term inflation rate is 5% (recently it’s also increasing) which will take 70/5= just 14 years to reduce your wealth to half its value.

40% EMI rule

You should never have more additional than 40% of your income into EMIs.

For example – With a salary of 60,000 per month, your EMIs should not exceed 24,000 otherwise it is going to be a burden on you. 

Always keep debt as the last alternative. As far as possible, make down payments for your acquisitions. In case you are shouldering big-ticket loans, look for a balance transfer chance. You can transfer your loan to another bank presenting a lesser rate of interest. This process helps you save a lot of money going out as interest. 

Always try to never borrow for assets which are depreciating. Also, tax-inefficient loans like personal loans should be avoided as far as practicable. You can think of saving and building a corpus to meet your goals. In this way, you can avoid falling into the debt trap.

Also Read: E-gold Investing: Make Money With Currency Trading

Rule of 4%

This rule of 4% for financial freedom is crucial for retired personnel. Never take out more than 4% of your retirement corpus per year until you have a preplan retirement investment. The Corpus required is 25 times your estimated Annual Expenditures. E.g., If your annual expenditures after 50 years of age are Rs. 5,00,000/- then Corpus which you mandate is Rs. 1.25 crores.

Likewise, it is important to invest the retirement corpus in a mix of debt mechanisms and equity to keep growing the Corpus which will last you a long time.

Planning for retirement is necessary for everybody.  You might be thinking that it’s too premature to start planning now. At this rate, you start retirement planning late and accumulate a smaller amount as corresponded to what you could accumulate given that you started early. This is anticipated to be the magic of compounding”. It stimulates you to even retire early and lead a hassle-free life. 

While planning for retirement, you require to clarify a few points like deciding on the age at which you want to retire. Along with that, estimate how much money you will require every month to meet your post-retirement expenses. 

Life Insurance Rule

Always strive to take a policy having a sum insured of 20X your present annual income. This will help cover family expenditures in the future in case of an untimely demise.

Also Read: 5 personal finance thumb rules for better financial planning

Emergency Fund rule

Put an amount of at least 6 times your present monthly income in an emergency fund to support in case of loss of employment or a medical emergency.

If possible, keep 12 times the amount of your current salary in liquid or near liquid assets (liquid mutual funds) as a safe side.

1-week spending rule

If you want to purchase an expensive thing but are unsure about it, delay the acquisition for a week. This will give you time to process the complete importance of the item, its returns or benefits, and avoid a notion of purchasing decision.


If you don’t know where to begin follow these 10 Golden Rules of Personal Finance, then take advice from a reliable source. You can even invest in Mutual Funds to get the benefit of diversification & professional fund management. Investing in Mutual Funds is made paperless and hassle-free on any platform. Choose wisely. You can also follow Authne Mutual Funds Article for the best knowledge your investment and how to invest to diversify your portfolio.

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