Top 10 Money Rules & Formulas Everyone Should Know (Smart Personal Finance Guide)

Let’s look into the most essential money rules you must know:

📌 1. Income - Savings = Expense

The reason why people complain about they won't be able to save at the end of the month, is they follow Income - Expense = Savings.

Put aside your 20-25% of monthly income and invest immediately after your salary comes.  

✅ Set your SIP date as the next day of your salary day.
✅ Pro-Tip: Invest 60-70% of your annual bonus. It will really boost your wealth creation journey.

📌 2. Rule of 72 – Formula of How Quickly Your Money Doubles

This Simple and powerful rule helps you estimate how long it takes for an investment to double, given a fixed annual interest rate.

Formula: 72 ÷ Interest Rate = Years to Double

Example: If your investment earns 12% per year: 72 ÷ 12 = 6 years to double.

Other way to look at:

You can calculate the rate of returns just by looking at how many years it will take to double your money.

Formula: 72 ÷ Years to Double = Interest Rate

Example: If someone says your money will be doubled in 9 years, you can easily calculate the interest rate is 72 ÷ 9 = 8%

✅ Use this to evaluate investment growth.

📌 3. 50/30/20 Rule – Budgeting Made Simple

A typical and popular budgeting formula to manage your income smartly.

Breakdown:

• 50% Needs (rent, groceries, bills etc)
• 30% Wants (dining, shopping, entertainment etc)
• 20% Savings (Investments into Mutual funds, Stocks, FDs, RDs etc)

✅ Pro-Tip: Use our Income Planner Calculator to plan your monthly income properly.

📌 4. Emergency Fund Rule – Be Prepared for the Unexpected

You should have at least 3–6 months’ worth of expenses saved in an emergency fund.

Example: If your monthly expenses are ₹30,000, aim for ₹90,000–₹1,80,000 in savings.

✅ Essential for financial stability.

📌 5. 28/36 Rule – Smart Borrowing for Home Buyers

You can use this formula to determine how much home loan you can afford.

Formula:

• Housing expenses ≤ 28% of gross income
• Total debt (EMIs, loans) ≤ 36% of gross income

✅ Prevents over-borrowing and ensures comfortable EMIs.

📌 6. 100 Minus Age Rule – Decide Your Investment Mix

This rule helps you allocate between equity (stocks) and debt (bonds) / FD or RD.

Formula: 100 – Your Age = % of portfolio in equity

Example: If you’re 30 years old: 100 – 30 = 70% in equity, 30% in debt/RD/FD

✅ Balances risk and returns based on age.

📌 7. 4% Withdrawal Rule – For Safe Retirement Planning

A guideline for how much you can withdraw from your retirement corpus annually.

This is a very effective rule if you are planning for retirement or retire early (Actually, you need to plan for your retirement as early as possible).

Formula: Withdraw 4% of your corpus each year to ensure it lasts 25–30 years.

Example: If your retirement corpus is 2 cores today and your 2 Cr is invested somewhere in equity and debt and if your annual blended returns from 2 Cr is 8% (16 Laks), your will withdraw only 8 lakhs, rest 8 lakhs will be fighting with inflation.

✅ Pro-Tip: Use our smart retirement calculator to calculate your retirement corpus

📌 8. House Buying Rule (2.5x Rule)

Buy a home that costs no more than 2.5 to 3 times your annual gross income.

Example: If your income is ₹10 LPA, ideal house price = ₹25L–₹30L

✅ Avoids getting trapped in home loan debt.

📌 9. Debt-to-Income Ratio (DTI Rule)

Your total monthly debt payments should not exceed 40% of your gross income.

Formula: (Total EMIs ÷ Gross Monthly Income) × 100 ≤ 40%

✅ Key metric for loan eligibility and financial health.

📌 10. Investment Diversification Rule

Don't put more than 10% of your investment amount in one asset or stock.

✅ Spreads risk and protects from market volatility.

✅ My Thoughts

Start applying them one by one in your financial life and notice the positive shift in your money habits.

Please do let me know your thoughts in the comment section below and do like❤️ and share with your friends and families😊.