However, since everyones situation is different, weve also included scenarios in which these rules are most applicable.
Budgeting
The 50/30/20 rule
This is a popular rule for breaking down your budget.
Those percentages help create a balance between obligations, goals and splurges.
Why it works:It keeps you from buying more vehicle than you could afford.
When it doesnt:Depending on your situation, these numbers might not be realistic for you.
Since you need your car to work, you might look elsewhere in your budget to cut costs.
However, buying a used car sucks minimizes the depreciation thats already been sucked out of the vehicle.
Generally speaking, research is important in considering all the variables.
Homeownership
The 20% rule
You should put at least20% downwhen buying a home.
You also wont have to payprivate mortgage insurance.
When it doesnt:While this is commonly accepted as practical advice, opinions can vary.
Some consider 20% unrealistic as its an overwhelming amount to save.
The income rule
Dont buy a house that costs more thanthree years worthof your gross annual income.
Some variations say no more than two years; others say two and a half.
These general rules give you an approximate amount to start with when thinking about homeownership.
But theres a long list of expenses,including closing costs, to consider, too.
And it all varies.
Check out ourlist of homeownership expensesthat you might overlook before you get going looking.
Why it works: It gives people a simple number to work with.
It also doesnt consider how much youve currently saved.
If youre playing catch-up, youll probably need to save considerably more than 10% of your income.
You should save 20x your gross annual income.
Why it works:It helps you focus on what youll need in the future.
When it doesnt:Its more of a common benchmark than a one-size-fits-all formula.
Why it works: It ensures youre taking out an affordable amount that youll be able to repay.
This is a sticky and complicated topic.
Why it works:Obviously, this is a big help in case an emergency arises in your life.
It keeps you from having to makedesperate decisions that can set you back.
The age rule for stocks
When investing, bonds are generally less risky than stocks.
So the rule follows that the older you get, the less you should invest in stocks.
It also assumes your retirement based on your age.
If youre planning to retire sooner, youll need to adjust.
Most of these rules are pretty solid, tried-and-true methods for planning your finances.
But again, personal finance is, well,personal.
