In life, we have many hand gestures that mean something. There is the forefinger and middle finger in the up position, representing peace. There is the palm flat and straight up meaning the ‘high five’ or better known as the ‘congratulations’ sign. One thumb stuck out while walking along the roadside means you are trying to get a ‘lift’ or a free ride from someone.  There’s the international one thumb up meaning ‘good job,’ ‘I made it,’ or ‘I have this under control.’ Wouldn’t it be wonderful if we could all give a ‘thumbs up’ when it comes to our finances?

Budgeting - The 50/20/30 Rule: One budgeting rule of thumb to live by is the 50/30/20 rule. This popular rule says you should put 50 percent of your income towards expenses, such as your mortgage or rent and bills. 20 percent is earmarked for your financial goals, such as paying off a student loan, debt, or saving up for retirement. Lastly, the other 30 percent of your income can go towards your wants in life, such as going to dinner or seeing a movie. If you aren’t sure where to start when it comes to budgeting, this is a helpful rule of thumb that allows you break it down into categories.

Buying a Vehicle – The 20/4/10 Rule: When you’re in the process of buying your next car, this is a good rule of thumb to live by - the 20/4/10 rule. Once you buy a car, you should put down 20 percent, you should finance the car for no more than four years, and you should not spend any more than ten percent of your income on transportation costs. This rule of thumb works because it stops you from buying a car you cannot afford financially and helps to calculate how much you are spending on your car payment, gas and insurance, which tends to vary depending on the vehicle. Are you debating whether to buy used or new? No problem, just remember the 10-year rule. Whichever route you choose to go, the rule is to plan on driving it for the next ten years.  

Homeownership – The 20 Percent Rule: At some point in all of our lives we decide to buy a home to call our own. So, what’s the rule of thumb when it comes to purchasing a house? Put down at least 20 percent. Why does this work? It ensures that you don’t spend more on a home than you can afford, it can lower your monthly mortgage costs and it can increase your chances of being accepted for a mortgage. What is another good rule of thumb to live by? Do not buy a home that costs more than three times your annual salary. By sticking to this rule, you should be safe on making your payments each month and still have funds to enjoy the pleasures of life.

Retirement – The 10 Percent Rule: A general and more popular rule of thumb to live by, is saving 10 percent of your monthly income towards retirement. When you start a 401(k), especially if you’re young and new to the workforce, you might not be sure how much of your income to set aside, so this is a great place to start. Save now; your future will thank you for it!

Student Loans – 1^st Year Salary Rule: As of 2017, the statistics are staggering. Americans owe over $1.45 trillion in student loan debt. That’s about $620 billion more than the total U.S. credit card debt. In fact, the average 2016 graduate has $37,172 in student loan debt, up six percent from last year. When it comes to paying off student loans, a good rule of thumb to live by is the first-year salary rule. You shouldn’t take out more in student loans than you expect to earn during your first year working. Don’t know what you can expect to make you’re first year? This undergraduate calculator can help you estimate.

By utilizing these five rules of thumb to live by, you can get your finances on track and save more than you ever thought possible. A big thumbs up to you!