ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Financial Rules and Tricks Saving you Money

Updated on October 28, 2013

Through the magic of math, and many experts advice, there are some common “rules of thumb” I wanted to pass your way along with a couple easy to use tips for your everyday life. Enjoy!

Rule of 25-

This rule is used to demonstrate how much cash you should have if you wanted to live only off of the interest. First determine in today’s dollars, how much you would like to live off of annually. Let’s use $50,000 as a nice round number. Once the amount is determined, multiple that amount by 25, in our examples case, this would be $1,250,000. That is the amount you would need to have in order to conservatively live off of the interest. Here is the math behind the numbers. This amount assumes a 7% return on your money. Now if we take $1,250,000 and multiply it by 7%, we get $87,500. That is because we are assuming around 3% for inflation, and a minimum 4% return which is needed to hit your $50,000. Now this is a pretty conservative return, and many years you will pass that mark, but the numbers are there to make sure that you are at least getting your annual amount you determined you needed to live off of.


Rule of 72-

This rule is to help you find out how long it will take your money to double. All you have to do is take the interest rate you are getting for your money, and divide 72 by that rate. Using our above example return rate of 7% we would take 72/7= about 10.3 years for our money to double.

How to figure out 15% tip really quick-

Instead of writing on scratch paper, or pulling out a calculator, use this trick to determine a quick 15% tip. Take your bill, let’s say $50, move the decimal 1 place to the left(this gives you 10%), so $5, then add to it half of that amount(5%), so $2.5. so your tip on $50 is $5+$2.50=$7.50, and to verify, $7.50 divided by $50= 15%. Lets try a more realistic example. Your bill is $37.28, round it up to the nearest dollar, so $38, move the decimal, so $3.80, split that in half and add it, being $3.80+$1.90(I would have just rounded to $2)and you get $5.70, or my rounded figure of $5.80. a percentage of just over 15%.

Rent or Buy Ratio-Rule of 15-

Use this rule to quickly determine whether renting or buying is better. take the cost of the home you are looking to buy, and divide it by the annual rental cost you are looking to rent(or currently rent). If the number is under 15, buying is generally better, if it is over 15, you are getting the better deal renting.

Rule of 70-

This rule will determine how long it will take for inflation to cut the value of the dollar in half. Just take 70 and divide it by the inflation rate(usually around 3%. At that rate, it will take just over 23 years for the dollar to be worth half its value today.

Those are just a few of the tips that can help you in your daily life, or important decisions.


Interested in learning more about personal finance? head over to my blog for more at http://www.stewardology.com/blog

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    Click to Rate This Article