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Your Take: What Are Your Rules of Thumb?

Posted By Jim On 10/09/2009 @ 7:08 am In Your Take | 27 Comments

There are a lot of “rules of thumb” in the personal finance world. We all know the classic ones: you should save at least 10% of your income, you should have 6 – 12 months of expenses saved into an emergency fund, and you should X% of your portfolio invested in stocks where X is 120 minus your age. In fact, rules of thumb are so ubiquitous in personal finance that I took a look at four rules of thumb in need of some refreshing [3].

However, those are publicly known rules of thumb that experts have repeated over and over again. What I’d like to know is whether you have any personal rules of thumb that you live by? It doesn’t have to be strictly personal finance related, it just has to have served you well over the years.

I ask because in my post about the best car for students [4], Financial Samurai [5] offered up a great rule:

I use the 1/10th rule we coined. Essentially, the car you buy should cost no more than 1/10th your gross income. I’ve used this rule to a T, and it works well.

I think that it might be a little on the low side, especially if you only have one income, but you wouldn’t be wrong to use a similar rule.

Do you have any personal rules of thumb that have worked well for you?


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[3] four rules of thumb in need of some refreshing: http://www.bargaineering.com/articles/four-rules-of-thumb-in-need-of-refreshing.html

[4] best car for students: http://www.bargaineering.com/articles/best-car-for-students-a-beater.html

[5] Financial Samurai: http://www.financialsamurai.com/

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