When it comes to your personal life, the rule of 33% can help you create balance and achieve success. For example, let's say you want to achieve a work-life balance. In order to do this, you need to make sure that you're spending 33% of your time on work, 33% on leisure activities, and 33% on personal growth.
The rule says that 50% of your after-tax income must be spent on needs and obligations that you have to meet, such as rent and utilities. The remaining half should then be split between 20% savings and debt repayment and 30% to your wants and entertainment.
The 70-20-10 rule holds that: 70 percent of your after-tax income should go toward basic monthly expenses like housing, utilities, food, transportation, and personal living expenses; 20 percent should be saved or put into investments, leaving 10 percent for debt repayment.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
The 50/30/20 has worked for some people — especially in past years when the cost of living was lower — but it's especially unfeasible for low-income Americans and people who live in expensive cities like San Francisco or New York.
"By the age of 35, you should have saved at least twice your annual salary," he says. "So, for example, if you're earning $50,000 per year, you should aim to have at least $100,000 in savings by the age of 35."
▣ 40/40/20 rule You can also accelerate the process of wealth creation with this rule 40% you can save & invest for your future. Another 40% can be used for essential expenses. 20% for everything else.
Basically, the Rule of 25x says that at retirement, you should have 25 times your planned annual spending saved. That means if you plan to spend $50,000 in your first year in retirement, you should have $1,250,000 in retirement assets when you walk away from your job.
50 - Consider allocating no more than 50 percent of take-home pay to essential expenses. 15 - Try to save 15 percent of pretax income (including employer contributions) for retirement. 5 - Save for the unexpected by keeping 5 percent of take-home pay in short-term savings for unplanned expenses.
Consider an individual who takes home $5,000 a month. Applying the 50/30/20 rule would give them a monthly budget of: 50% for mandatory expenses = $2,500. 20% to savings and debt repayment = $1,000.
Divide 72 by your average expected annual return
If instead your average expected annual return was a more modest 7% (accounting for the typical annual inflation of around 3%), dividing 72 by 7 would result in 10.3, meaning it would take slightly over a decade for your money to double under those conditions.
The 80/20 rule can be effectively used to guard against risk when individuals put 80% of their money into safer investments, like savings bonds and CDs, and the remaining 20% into riskier growth stocks.
The 10,5,3 rule
Though there are no guaranteed returns for mutual funds, as per this rule, one should expect 10 percent returns from long term equity investment, 5 percent returns from debt instruments. And 3 percent is the average rate of return that one usually gets from savings bank accounts.
A common rule of thumb is to have at least three months and ideally six months worth of living expenses in your savings at a minimum. This is to ensure you can manage if you were to suddenly be out of a job, if a health problem emerges or a change in personal circumstances occurs.
The 80/20 budgeting method is a common budgeting approach. It involves saving 20% of your income and limiting your spending to 80% of your earnings. This technique allows you to put savings first, and it's both flexible and easy.
Estimate your total savings needs
The first is the rule of 25: You should have 25 times your planned annual spending saved before you retire. That means that if you plan to spend $30,000 during your first year in retirement, you should have $750,000 invested when you walk away from your desk.
If you take $10,000 and break it down into smaller, “bit-size” chunks you come to 27.40 per day, $192.30 per week, $384.62 per fortnight or $833.33 per month. From here you need to match the timing of your income (pay cycle or business income cycle) and then take that amount out each time period.
The 10x rule says that by 67, you should have saved 10x your annual salary. So if you make $65,000/yr., $650,000 will be in your account. Having a retirement income of $52,000/yr. (80%), budgeting for 3.8% inflation and a 9% investment return--the money will last until you're 88.
For example, if you spend 75% of your income on living expenses, reduce the amount you put into your savings by 5%. If you want to put more money into your savings, you must reduce your living expenses and/or decrease your debt.
There are several different ways to go about creating a budget but one of the easiest formulas is the 10-10-10-70 principle. This principle consists of allocating 10% of your monthly income to each of the following categories: emergency fund, long-term savings, and giving. The remaining 70% is for your living expenses.
Applying around 70% of your take-home pay to needs, letting around 20% go to wants, and aiming to save only 10% are simply more realistic goals to shoot for right now.
30/30/40. Thirty percent of your income goes toward housing expenses, 30% toward other living costs like food and transportation, and 40% toward discretionary spending and savings.
The biggest chunk, 70%, goes towards living expenses while 20% goes towards repaying any debt, or to savings if all your debt is covered. The remaining 10% is your 'fun bucket', money set aside for the things you want after your essentials, debt and savings goals are taken care of.
With this simple budget, 60% of your income (before taxes and other withholdings) goes to fixed expenses, such as: Taxes, Social Security, Medicare. Insurance premiums. Housing.
What is the 50/30/20 budget system? The popular 50/30/20 budget is a great way to maximise your money. In it, you spend roughly 50% of your after-tax dollars on necessities, no more than 30% on wants, and at least 20% on savings and debt repayment. We like the simplicity of this plan.