Financial Rules Of Thumb: An Excellent Way to Manage the Finance

Posted by Amelie Wilson on November 5th, 2019

Do you know managing finance needs math? Many financial experts claimed that without proper mathematics, you would not be able to handle the money. You might be afraid to know that this face. But relax! It does not require calculus, so take it easy.

All you need here is to find the percentage, and this is known as “FINANCIAL RULE OF THUMB.” It is quite a unique method to handle money. Why? 

In a financial rule of thumb, you can save money for internal as well as external costs too. Is not it amazing!? There is an only limitation that is:

“Managing the surprising costs”

You can save money with this method, but you cannot predict the exact amount you want. There is a way through which you can overlook this problem, and that is 15 minute loans from direct lenders in the UK. Now, you can quickly get rid of unexpected expenditures.

Let’s learn more about it in this blog...

Financial Rule of Thumb

It is a rule you have to divide the whole expenses according to the person’s monthly income. You do not require finding these percentages because we have already mentioned that in this rule.

• House Expenditures: Make sure that you are not exceeding 25% of your income. It may vary, but not every time.Vehicle cost: The cost of your vehicle should not cross half of your income annually. Do not consider monthly.
• Save money for retirement: This part will cover 15% of your income.
• Life insurance: Create insurance at least for ten years. You may choose more than that.
• Money for an emergency fund: Individuals should have money to cope up 3 to 6 month’s expense.
• Other unnecessary expenses: It includes some things such as buying an engagement ring, clothes, and many more.These are the six areas where you have to monitor the outgoing of money.

Things keep remembering while following the financial rule of thumb

There are certain things that you have to follow to make it successful. Those points are mentioned below...

• There must be a fixed source of income
  

If you are doing freelancing where the income is not constant, then following this is not a good idea. Make sure you receive a pay check every month. Besides that, you can do part-time jobs to achieve stability.

• Track the spending

Many people spend money on unnecessary things which they do not require. You must find out and remove them. The best way is to get the previous month's expenses list and bills. You will get an idea about how much you are spending over unnecessary and necessary things. 

•  Need patience and hope
  

There are so many budgeting methods, and some of them are good, and some of them are not effective. Remember one thing, which does not matter which one you are following; all plans need patience and hope.

• Get help from external sources
  

Many such situations occur that may rupture the financial program. But instead of giving up, you can take assistance with some external sources such as a loan or borrow money from relatives. If you think a loan is a reliable option, then you can take aid with bad credit loans where no guarantor is required. With the borrowed money, you can again get back on the track. These are the points that you have to keep in mind when following this rule. The most crucial part is that endurance and expectation. If you have these two things, then surely you will become financially independent.