We all have some or other plans for our future. Most of us have planned how our retirement is going to be. For those who still have not planned anything yet, here is your personal guide to savings and investments.

Long term savings must be 12 per cent of gross income or at least 10 per cent of gross income which is considered as sufficient. Apart from these savings, one should have retirement plan in terms of short term savings and college savings for kids which should be 4 per cent and 2 per cent of gross income respectively.

Mentioned below are few rules of thumb for savings and investment:

  1. Your house value must be 2-3 times of your family’s annual income.

  2. Value of your car should be less than 50% of your annual income.

  3. New car must be used for 10 years for complete Return on Investment.

  4. Allocate your assets in such a way that equity percentage in your portfolio is 100 minus your age.

  5. One should also save for emergency fund. Ideally, it should be 3-6 months of your monthly expenses. For a retired person it should be 1 year expense.

  6. Remember the rule of 72 in order to calculate number of years in which amount will double. It’s 72/Rate of Return. Similarly, number of years in which amount will triple will be 114/rate of return.

  7. To calculate long term return use 10/5/3 rule. From Equity the return should be 10%, from bonds 5% and from liquid funds 3%.

Money needed at the time of retirement is 75 to 80% of pre-retirement income. If you want to make your retirement income to last for more than 30 years then save at least 12 per cent of your gross income. If you are close to your retirement then save 20 to 30 per cent of your gross income.

Few other suggestions for making money for future are investing in stocks and bond mutual funds that follow the market indexes.