How fast can you double your money? 6 cardinal rules of good investment - Thumb rules for your financial queries (2024)

May 24, 2018, 12:07:28 PM IST

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Thumb rules for your financial queries

Knowing financial rules can do wonders for you, be it in investing or in your day-to-day activities. There are thumb rules that can solve financial queries in no time.

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Rule of 72

Rule of 114

One can use this method to estimate how much time it will take to triple the wealth. Here you have to divide 114 by interest rate to get in how many years your money gets tripled.

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Rule of 144

100 minus your age rule

This method is used for asset allocation in the financial world. One just has to subtract age from 100 to identify how much of your portfolio should be allocated to equities. For instance, if your age is 20, then the logic says you can invest 80 per cent of the amount in equities and rest in debt.

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Future value of present goals

The amount which looks attractive at present may not look attractive over a period of time due to rising inflation. With rising inflation, the purchasing power of individuals for the same product would reduce with every passing year. If you want to know the future value of 10 lakhs after 10 years at 10 per cent annual rate of inflation, the below formula can help.

Future Value (FV) = PV (1+r/100)n

where;
FV= Future value of your goal
PV= Present value or current cost of your goal
r= annual rate of inflation
n= time left to reach your goals (in years)

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The 50-20-30 Rule

This is a handy rule of budgeting. According to experts, 50-30-20 rule can help you to save well and manage your day to day expenses. The rule says about 50 per cent of the money you earned after tax should go towards living expenses including electricity bill, water bill, groceries, telephone bill, and any other sort of liabilities you have. Another 20 per cent set aside for short term goals and emergency fund and you should be able to save at least 30 per cent of your take home for your long term goals.

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