Personal finance rules that one should follow

Personal finance rules are like advices for an individual. These rules will help you to gauge your personal finance situation. These rules are generalized but everyone has his/her own unique financial life. So, use these rules just for understanding your personal financial health but not for taking any financial decisions. It is always important to consult your financial planner before taking any decisions on personal finance.

Savings
As it is rightly pointed out by Warren Buffett, “Do not save what is left after spending, spend what is left after saving”. As a rule you should at least save 10 per cent of your income. Even you can automate these savings as that would help you to save in disciplined manner. Saving 10 per cent of your income regularly would help you to achieve your financial goals and also help you build wealth over time.

Emergency fund
Having an emergency fund at first place is very important as this will not only help you at the time of emergency, but also help you to protect your savings allocated towards your financial needs. Now the question is how much one must put in the fund. Although it depends upon your occupation and overall financial situation, but you can consult your financial planner. As a rule, you should have your expenses of at least 3 months in your emergency fund.

Debt
Debt is something that might eat up your future income. Though it is not always bad to have a debt, but it is important to have it in limits. So, what are these limits? Your EMI (excluding EMIs on your first home) must not exceed 30 per cent of your income. Including EMIs on your first home, it should not be more than 50 per cent of your income. Therefore, managing debt is crucial as it will get you a higher anticipated surplus that can be dedicated towards wealth creation and fulfillment of your financial objectives.