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 Rules of Wealth Creation-2

1) *50-30-20 Rule - about allocation of income to expense*

Divide your income into

50% - Needs (Groceries, rent, emi, etc)

30% - Wants (Entertainment, vacations, etc)

20% - Savings (Equity, MFs, Debt, FD, etc)

Atleast try to save 20% of your income.

2) *3X Emergency Rule*

Always put atleast 3 times your monthly income in Emergency funds for emergencies such as Loss of employment, medical emergency, etc.

3 X Monthly Income. In fact, one can have around 6 X Monthly Income in liquid or near liquid assets to be on a safer side.

3) *40%EMI Rule*

Never go beyond 40% of your income into EMIs.

Say you earn, 50,000 per month. So you should not have EMIs more than 20,000.

4) *Life Insurance Rule*

Always have Sum Assured as 20 times of your Annual Income

20 X Annual Income. Say you earn 5 Lacs annually, you should at least have 1 crore insurance by following this Rule.

5) Rule of 144*

 No of years it takes to double your money at a given rate, when investment is done via SIP. E.g. If rate is 15% then sip corpus will double in 144/15= 9.6 years.

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