Rules of financial planning have changed: Sticking to old ones could be disastrous
Never take a loan to invest. Don’t borrow more than you can repay. Spend less than you earn. It is often said that if you stick to these simple rules, you won’t ever go wrong in money matters. In financial planning too, there are several thumb rules that serve as broad guidelines for formulating strategies.
Financial planners believe that significant changes in the past few years have rendered some time-tested tenets obsolete. While these canons of financial planning are still very use ..
1. Rule to junk: Save 10% of your salary for retirement
Rule to follow: Increase the savings rate to 20%
2. Rule to junk: Equity exposure should follow the 100 minus age formula
Rule to follow: Equity exposure should be 110-120 minus age
3. Rule to junk: The 50-20-30 budgeting rule for necessities, savings and wants
Rule to follow: Save at least 30% of your income every month
4. Rule to junk: Contingency fund should be equal to 3-6 months’ expenses
Rule to follow: Corpus should cover nine months’ expenses
5. Rule to junk: Life insurance cover should be 10 times your annual income
Rule to follow: Hike cover to 15-20 times your annual income if you are under 40
6. Rule to junk: A health cover of Rs 3-5-lakh is adequate for metro dwellers
Rule to follow: Look at a total health cover of at least Rs 10 lakh
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