Money Basics
Financial Literacy
The Money-Rule Cheat Sheet
Six back-of-the-envelope rules that turn complicated money decisions into mental math you can do in seconds.
The ruleWhat it meansIn practice
Rule of
72
72 ÷ your annual return ≈ the number of years for your money to double.
At a 10% return, your money doubles in about 7 years.
Rule of
2,000
Your hourly wage × 2,000 is roughly your annual salary.
A $20/hour job is about $40,000 a year.
Rule of
25×
25 × your annual expenses is roughly the nest egg you need to retire.
$60,000/yr in spending → about $1.5M.
Rule of
4%
Draw about 4% of your portfolio in year one of retirement, then adjust for inflation.
A $1.5M portfolio → roughly $60,000/year.
Rule of
3–4×
Keep your home price at or below 3‑4× your annual income.
$120k income → aim for a range of $360k–$480k.
Rule of
10–20×
Carry life insurance coverage at roughly 10‑20× your annual income.
$100k income → between $1M–$2M in coverage.