· SAVINGS-INCOME RATIO RULE
o If you are in your 30s, aim for a 1:1 ratio between your liquid assets (savings and investments, excluding your home) and annual income.
o The ratio should increase with age to ensure you are saving enough to reach your retirement goal.
o For a couple aged 40, it should be around 1.5 or higher.
o At 45 years, it should be around 3, and at 50 years, it should be 4.5.
· EMERGENCY FUND RULE
o Put away at least 3-6 months’ worth of living expenses as an emergency fund to cover eventualities such as job loss or medical issues.
o A contingency fund should be a separate liquid savings account, even if it earns low interest, to ensure it is available at short notice.
· 100 MINUS YOUR AGE RULE
o This rule is used for asset allocation.
o Subtract your age from 100 to find how much should be your equity portfolio.
o If your age is 30 years, your equity portfolio should be 70%.
o If your age is 50 years, your equity portfolio should be 50%.
o If your age is 60 years, your equity portfolio should be 40%.
o If your age is 70 years, your equity portfolio should be 30%.