FinSmart

Master Financial Rules & Ratios

11 Financial Rules
Real-time Calculations
Smart Planning

The Rule of 72 is a simple way to determine how long it will take for an investment to double given a fixed annual interest rate. Just divide 72 by the annual rate of return.

Example: With a 6% annual return, money will double in approximately 12 years (72 ÷ 6 = 12)

Rule of 72 Calculator

Calculate how long it takes for your money to double based on the interest rate.

The Rule of 70 helps estimate how long it will take for prices to double due to inflation. It's slightly more accurate than the Rule of 72 for lower rates.

Example: With 2% inflation, prices will double in about 35 years (70 ÷ 2 = 35)

Rule of 70 (Inflation) Calculator

Calculate how long it takes for prices to double due to inflation.

The 4% Rule suggests that you can withdraw 4% of your retirement savings each year with high probability of not running out of money during retirement.

Example: With $1,000,000 saved, you can safely withdraw $40,000 annually

4% Withdrawal Rule

The 100 Minus Age Rule is a simple guideline to help you determine how much of your investment portfolio should be allocated to stocks versus bonds.

Example: A 30-year-old should have 70% in stocks (100 - 30) and 30% in bonds.

100 Minus Age Rule

The 10-5-3 Rule is a simple guideline for how much to allocate in your portfolio: 10% to Stocks, 5% to Bonds, and 3% to Cash/Savings.

Example: If you have $10,000 to invest, you would allocate $1,000 to Stocks, $500 to Bonds, and $300 to Cash/Savings.

10-5-3 Rule

The 50/30/20 Rule provides a framework for basic budgeting: 50% for needs, 30% for wants, and 20% for savings and debt repayment.

Example: On a $5,000 monthly income: $2,500 for needs, $1,500 for wants, $1,000 for savings

50-30-20 Rule

The 3X Emergency Fund Rule recommends that you have three times your monthly expenses saved in case of emergencies.

Example: If your monthly expenses are $3,000, you should have $9,000 saved.

3X Emergency Fund

The 40% EMI Rule suggests that your EMI payments should not exceed 40% of your monthly income to maintain financial stability.

Example: If your monthly income is $4,000, your maximum EMI should be $1,600.

40% EMI Rule

The Rule of 144 provides a guideline for determining a stock's fair value based on its P/E ratio. Stocks with a P/E ratio below this benchmark are considered potentially undervalued.

Example: If the stock price is $50 and the P/E ratio is 15, then the rating would be 144/15 = 9.6.

Rule of 144

The Revolving Credit Rule helps you monitor credit utilization. Keeping it below 30% is usually recommended for maintaining a good credit score.

Example: If your credit limit is $10,000 and your current balance is $2,000, your utilization rate is 20%.

Revolving Credit

The Life Insurance Rule recommends that your coverage should be a multiple of your annual income based on your age, to ensure your dependents are financially protected.

Example: If you are 30 years old and have an annual income of $70,000, you should have around $1,400,000 in life insurance (20x income).

Life Insurance