October 9, 2009

Some of My Financial Rules of Thumb

Below are some financial Rule of Thumb's that I use. (Is it Rules of Thumb or Rule of Thumbs? I didn't major in English. ) Some of these are rules I've gotten from other people and some are ones I've made up on my own.

Home costs: the amount you spend on your home purchase should be no more than your down payment + salary x 2.5. So if you have $10,000 to put down and you make $50,000 a year then I wouldn't buy more than $10,000 + $50,000 x 2.5 = $135,000

Maximum Student loans : Your student loans should be less than your expected starting salary. For example: if you are going to school to become a teacher and you expect to make $35,000 a year starting, you should not get loans for more than $35,000.

Saving on gasoline : Don't drive over 1 mile to save 1% in gasoline costs. Example: If gas is $2.50 at one station nearby and $2.45 at a station 3 miles away then then you're driving 3 miles to save 2% which is more than the 1 mile / 1% rule.

Rental Investment Costs: Amount to pay for rental shouldn't be more than the monthly rent x 100. Example: a house rents for $1,000 a month so $1000 x 100 = purchase value of $100,000.

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