Some Financial Thumb Rules


1. Around 15 per cent is a sign of good liquidity. Above it can be excess liquidity meaning the person is losing out on investment opportunities.
2. Net worth thumb rule = (Your age x gross annual income from all sources except inheritances)/10* Example: If you're 30 and earn Rs 5 lakh a year, ideally you should have a net worth equal to or more than Rs 15 lakhs.
3. Housing Loan Outflow: Housing loa Housing loan expenses should not exceed 30 per cent of gross monthly income.
4. Funds Allocation: 2-3 Equity diversified Mutual Fund (Tax + Non-Tax saving) : 1-2 Debt Fund :  1-2 ETF’s or Index Funds
5. XIRR: Internal Rate of return when the transactions are not periodic (XIRR calculates the annualized internal rate of return of a cash flow at arbitrary points in time. values lists the payments (negative values) and receipts (positive values) with one value for each entry in dates). This can be very easily calculated in excel with the function XIRR(values,dates[,guess])
6. CAGR
The year-over-year growth rate of an investment over a specified period of time. The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.
Compound Annual Growth Rate (CAGR)

CAGR Calculator
Enter your initial amount and any two of the other fields
and the calculator will calculate the fourth field.
Initial amount:
Ending amount:
Years of investment:
CAGR : %
7. Retirement Corpus: As per one calculation, you multiply the current yearly requirements by 25 to get the amount. For example if you need 1 Lakhs today, probably you will need 25 Lakhs in the year you retire. This calculation doesn't seem to consider inflation. Then there is this retirement calculator which gives you the amount you need for retirement.
Retirement corpus
OR
Monthly Income Required (Current Value)
Years left for Retirement(Years)
Inflation Expected upto retirement(%)
% Increase in Investments/year
Return Expected(%) from Investments before retirement
Total Retirement years
Inflation Expected during retirement(%)
Return Expected(%) from Investments during retirement

Once you have this amount you can use the below to estimate how much money you will need to save monthly to reach your goal.
Monthly Investment
Yearly % increase in SIP
Return Expected from
investments per year (%)
Total Duration (Years)