12 Golden Rules of Personal Finance | THE BROKEN WALLET (2024)

FAQs

What is the 80 10 10 financial plan? ›

In this approach, like other popular budgets, 80% of income goes towards spendings, such as bills, groceries, or anything else needed. 10% of income goes directly into savings to ensure that money is added regularly. The last 10% of income goes to charity.

The 10% rule, often mentioned in personal finance discussions, recommends putting (yep, you guessed it) 10% of your income toward savings and investments. It's a simple way to encourage financial responsibility and help you build a solid financial future.

Pay Yourself first; The golden rule of personal finance, known as “Pay Yourself First,” introduces a critical tweak to the traditional approach. The expression “pay yourself first” refers to the investor attitude of automatically routing a specified savings contribution from each paycheck at the time it is received.

#1 Don't Spend More Than You Make

When your bank balance is looking healthy after payday, it's easy to overspend and not be as careful. However, there are several issues at play that result in people relying on borrowing money, racking up debt and living way beyond their means.

Key Points. The 50-30-20 rule is a simple guideline (not a hard-and-fast rule) for building a budget. The plan allocates 50% of your income to necessities, 30% toward entertainment and “fun,” and 20% toward savings and debt reduction.

Key Takeaways. The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

The Rule of 69 is a simple calculation to estimate the time needed for an investment to double if you know the interest rate and if the interest is compounded. For example, if a real estate investor earns twenty percent on an investment, they divide 69 by the 20 percent return and add 0.35 to the result.

One simple rule of thumb I tend to adopt is going by the 4-3-2-1 ratios to budgeting. This ratio allocates 40% of your income towards expenses, 30% towards housing, 20% towards savings and investments and 10% towards insurance.

The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.

What Is the Rule of 72? The Rule of 72 is an easy way to calculate how long an investment will take to double in value given a fixed annual rate of interest. Dividing 72 by the annual rate of return gives investors an estimate of how many years it will take for the initial investment to duplicate.

What is the rule of 70 in personal finance? ›

The rule of 70 is used to determine the number of years it takes for a variable to double by dividing the number 70 by the variable's growth rate. The rule of 70 is generally used to determine how long it would take for an investment to double given the annual rate of return.

The mistake most people make is assuming they must be out of debt before they start investing. In doing so, they miss out on the number one key to success in investing: TIME. The 70/30 Rule is simple: Live on 70% of your income, save 20%, and give 10% to your Church, or favorite charity.

The rule requires that you divide after-tax income into two categories: savings and everything else. As long as 20% of your income is used to pay yourself first, you're free to spend the remaining 80% on needs and wants.

Some financial experts recommend the Rule of 42 for spreading your investments over many different assets. As the name implies, the Rule of 42 is an investing strategy that calls for you to include at least 42 different equities and other assets in your portfolio.

The 4% rule for retirement budgeting suggests that a retiree withdraw 4% of the balance in their retirement account(s) in the first year after retiring, and then withdraw the same dollar amount, adjusted for inflation, every year thereafter.

This arrangement can be contrasted with the traditional single mortgage with a down payment amount of 20%. The 80-10-10 mortgage is a type of piggyback mortgage.

The diet is based on the idea that the optimal diet should provide at least 80% of calories from carbs, with no more than 10% of calories from protein and 10% from fats. Unlike many popular diets, the 80/10/10 Diet has no time limit.

The principle suggests that the top 10% are inherently motivated and must be empowered to role model top behaviors, while the bottom 10% should be neutralized—and then the majority 80% can follow the top leads.

So, what exactly is the 80/10/10 method? Simply put, it entails allocating 80% of your investments into long-term ETFs or Mutual Funds (such as VTI, QQQ, SPY, etc.), dedicating 10% to a single value investment, and keeping another 10% in reserve in a money market in case an additional value opportunity arises.