5 Financial Guidelines Every Working Adult Should Know

While situations vary and there are no ‘one-size-fits-all’ rules for managing money, there are sensible guidelines for spending and saving that have long stood the test of time.



Here are five basic financial guidelines consumer advisors recommend.

1. 50/30/20 for Budgeting –

Perhaps the oldest but still relevant rule for budgeting is that of 50/30/20; that is, 50% for necessities like housing, food and bills, 30% for discretionary spending on vacations, dining out and entertainment, and 20% for paying off debt, saving for retirement and other financial goals.

2. The 10% Retirement Rule

Saving 10% of gross income for retirement has long been the gold standard. But at the current rate of inflation, and given that people are living longer, saving 20% for your golden years may be wiser.

3. The Six-Month Rule for Emergencies

Job loss, unexpected expenses and all sorts of other emergencies can upend anyone’s life. That’s why it’s important to have six months’ worth of expenses in a readily accessible account.

4. The 20% Rule for Buying a Home

While there are many ways to finance a home with less of a down payment, sticking to the traditional 20% down payment guideline will not only increase your chances of being approved for a mortgage, but can significantly lower your monthly payment.

5. The 20/4/10 Rule for Buying a New Car

Buying a used car makes good financial sense. But if you purchase a new car, be prepared to put at least 20% down, finance it for four years to incur little or no interest and allocate no more than 10% of your income on your car payment. For maximum value, plan to drive it for 10 years or more.

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