Personal finance rules of thumb for India, with sources

Every money decision has a personal finance rule of thumb behind it: how much to save, how big an emergency fund, which loan to clear first. Many were first written for American salaries. Here are 20, each in one line, with where it comes from and what changes for India.

Spend and save

The 50/30/20 budget

Split take-home into 50% needs, 30% wants and 20% savings.^[1]

Home-loan EMIs push needs past 50% in many Indian homes. RupeeFrame counts EMIs as needs and flags it, and never lets saving drop below your floor. Worked in rupees.

Pay yourself first

Save on payday, then spend what's left. Not the other way round.^[2]

Auto-debit SIPs and e-mandates make this easy. RupeeFrame counts only money set to go out each month, not what happens to be left at month-end. Worked in rupees.

The 24-hour rule

Wait a day before any non-essential buy.^[3]

Sale days and one-tap UPI make impulse buys easy. RupeeFrame brings this rule up when your wants run past their line. Worked in rupees.

Save half of every raise

When pay goes up, save at least half the increase before lifestyle catches up.^[4]

Appraisal hikes of 8–12% are common. RupeeFrame works out half of your expected raise, and Plan ahead's Pay rise uses the same split. Worked in rupees.

Safety net

The emergency fund

Keep 3 to 6 months of essential spending in cash you can reach in a day.^[5]

RupeeFrame sizes it to your life: 3 months for a government job, 6 for a private salary, 9 for business income, more with dependants or no health cover, up to 12. Worked in rupees.

The 1-year runway

Before leaving a job to start up or switch careers, save a full year of basic expenses.^[6]

For freelance or business income, RupeeFrame already plans a bigger fund, up to 12 months: the runway, every month. Worked in rupees.

10× life cover

Term cover of at least 10 times your yearly income, plus your loans.^[7]

Endowment and ULIP policies rarely give enough cover. RupeeFrame sizes term cover from your family's real spending and loans, with the 10× check beside it. Worked in rupees.

Health cover of your own

Hold a family health policy of your own, sized for your city and family, apart from your employer's.^[8]

IRDAI lets you move from a group policy to your own when you leave a job, but buying early is simpler. RupeeFrame sizes cover at ₹10 lakh in a metro or ₹5 lakh elsewhere, and doesn't count your employer's. Worked in rupees.

Borrow

Debt avalanche or snowball

Pay the minimum on every loan, then put every extra rupee into one: the costliest (avalanche) or the smallest (snowball).^[9]

Credit-card dues at 36–42% a year are the costliest debt in India. RupeeFrame uses avalanche: costliest first, a red flag from 12%. Worked in rupees.

The 28/36 housing rule

Housing under 28% of gross income; all EMIs together under 36%.^[10]

Indian banks judge take-home instead (FOIR, often 40–50%). RupeeFrame checks both: 28/36 on gross pay, and 30/45 on take-home. Worked in rupees.

The 20/4/10 car rule

20% down, a loan of 4 years at most, and car costs under 10% of income.^[11]

RupeeFrame applies the 10% to take-home, stricter than gross, since that's what pays the EMI. Plan ahead's Buy a car checks all three. Worked in rupees.

Grow

The Rule of 72

72 ÷ yearly return = years for your money to double.^[12]

RupeeFrame uses it to show what cash idling in a savings account loses against deposits and investing. Worked in rupees.

100 minus your age

Hold roughly (100 − your age)% in equity; the rest in safer debt.^[13]

RupeeFrame starts at 100 − age, moves it 10 points with your risk level, keeps about 10% in gold, and flags a mix more than 10 points off. Worked in rupees.

The 1% bet rule

No single risky bet above 1% of your net worth.^[14]

Add each bet as a High-risk bets row in My numbers. RupeeFrame assumes no return on them and flags any above the line. Worked in rupees.

Match, then max

Take free employer money first, then clear costly debt, then fill tax-saving accounts.^[15]

India's version of the employer match is EPF and employer NPS. RupeeFrame works in the same order: costly debt (R2) comes before every growth rule. Worked in rupees.

Keep property in proportion

Keep what you own in property under a set share of net worth, so most of your wealth can be reached.^[16]

RBI found 84% of the average Indian household's wealth sits in property and other physical assets. RupeeFrame flags property above your line: 60% at medium risk, 50% low, 70% high. Worked in rupees.

Retire

10% for tomorrow

Put at least 10% of gross pay towards retirement from your first job; more if you start late.^[17]

EPF covers part of it on its own. RupeeFrame counts EPF at its legal minimum (₹3,600 a month) unless you enter more, plus PPF, NPS and equity SIPs. Worked in rupees.

The 25× number

Your retirement target is 25 times a year's spending.^[18]

With Indian inflation of 6% or more, 25× runs thin for an early retirement; many planners use 30–33×. RupeeFrame projects your own spending to 85 instead, and shows 25× beside it. Worked in rupees.

The 4% rule

Draw 4% of your pot in year one, then raise it by inflation every year.^[19]

Higher inflation makes 3–3.5% safer in India. RupeeFrame runs your withdrawals year by year in three return cases instead of one rate. Worked in rupees.

Net worth for your age

Expected net worth = your age × yearly income ÷ 10.^[20]

RupeeFrame uses your CTC as yearly income, and counts everything you own less everything you owe. Worked in rupees.

What these rules are, and aren't

• Starting points, not laws. Each flags a decision worth a second look; your income, family and goals can call for a different line.
• Sources are cited, not endorsed. A regulator's guide or a study is where the rule comes from, not advice about your case.
• Numbers age. Rates, tax limits and inflation move; the money rules page and the calculators use current values.

Rules of thumb for planning, not advice on any product. Where a rule has several sources, the money rules page lists them all.