Tuesday, 27 October 2015

The 30% rule, the rule of 25, the rule of 20/80, the 4% rule and many others.

Today we gonna play with numbers. There are a lot of arbitrarily set rules, but right know i will talk only about the ones that are essential for financial independence.
The 4% withdrawal rule:  It's a rule of thumb used to determine the amount of funds to withdraw from a retirement account each year.
The rule of multiply by 25:  This rule estimates how much money you'll need in retirement by multiplying your desired annual income by 25.
The rule of 30% : State that you should pay no more than 30% of your monthly income for your rent.
The rules of house end price: This area is a bit murky, but the experts agree that mortgage should be no more than 28-36% of your monthly income, i think we can safely apply the rule of 30% here too, and, here it comes, the house price should be no more than 2.5 x annual income. Where i can find a 45 thousands pounds flat, God only know!

Oh, and i leave it for last, the rule of 20/80. This rule state that we get 80% of our happiness and satisfaction from a mere 20% of our daily activities. Do them first, i'd say!


  1. I like the 80/20 rule the best as it applies to so many areas in life!

  2. Yes indeed, you can use it in every situation, you just need to adapt it.