Follow these 5 rules to achieve your Financial Freedom

Financial thumb rules provide helpful shortcuts and help us in making quick calculations and decisions.  You don’t have to have detailed spreadsheet calculations to choose right decisions.


Your property should generate an annual rental yield of at least three per cent of the property purchase cost.

Your property should generate an annual rental yield of at least three per cent of the property purchase cost.

For example, if property costs Rs 50 lakh, your rent should be at least Rs 1.5 lakh / Annum. This is a loosely applied thumb rule, and the actual rental yields may vary wildly from one location to another. But a good point of reference nevertheless.


You must always own an emergency fund that’s at least three times your current monthly income. That’s the bare minimum. You can go up to six months and keep building if you feel the need to do so. This is up to you. This fund will keep you financially stable in emergencies such as loss of employment, urgent travel, repairs, etc.


If you are buying life insurance, make sure that your sum assured can take care of your family’s income needs for the long term. Term Insurance is the most economical way to achieve this. If you are in your 30s or 40’s, the sum assured should be at least 20x your current annual income or more.


All your EMIs combined should ideally be no more than 40 per cent of your take-home income. For example, if your take-home pay is Rs 50,000, your combined EMIs should ideally be Rs 20,000. While few would stop you from going over this limit, you will strain your finances, lower your savings, and run the risk of defaulting on your EMIs.

THE 50-40-10 RULE

This is a ratio which says how much you should spend from your monthly income on fixed expenses such as rent, entertainment, etc  (50 per cent), EMI expenses such as eating out (40 per cent), and minimum savings and investments (10 per cent).

As the income progressive & grows then the savings and investment should be more than 20% – 50%.

As these are general financial thumb rules — the most basic guidelines to better manage your money. Depending on your life stage, income, and life priorities, you may fine-tune these rules to achieve the best results.

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Sathish Kumar

Equity Fund Manager | Wealth Consultant | Author


Whatsapp / Call –  +919841058689