Money Basics: Financial rules of thumb

There are several well-known financial rules of thumb that provide guidance for investors. Here are some examples commonly used in the States.

• Save at least 10-15% of your take-home income for retirement.
• Have at least five times your gross salary in life insurance death benefit.
• Pay off your highest-interest credit cards first.
• The stock market has a long-term average return of 10%.
• You should have an emergency fund equal to six months’ worth of household expenses.
• Your age represents the percentage of bonds you should have in your portfolio.
• Your age subtracted from 100 represents the percentage of stocks you should have in your portfolio.
• A balanced portfolio is 60% stocks, 40% bonds.

 
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