1. The Rental Rule
As “immobilo” reports, a rule of thumb states that a maximum of 30 percent of the net income may flow into the gross rent – if this can be achieved, one is usually financially well prepared for further expenses. Unfortunately, rents in Germany are rising faster and faster, in contrast to salaries, which is why it is hardly possible to follow this rule of thumb in some German cities such as Cologne or Munich.
2. The repair formula
This formula only applies to electronic devices, but it is helpful when deciding whether an expensive old electronic device such as a refrigerator should be disposed of or whether it should be repaired again:
If the device is more than 8 years old or if the repair costs more than half the price of the new purchase, “moospara.de” recommends that it should no longer be repaired.
3. The operating cost formula (car)
Anyone who buys a new car often forgets to compare the operating costs of different models or cannot estimate them correctly. The operating cost formula helps here: The monthly operating costs for the first five years can be easily calculated by dividing the purchase price by the number 30, according to “moospara.de”. If the vehicle costs around 30,000 euros, the monthly operating costs in the first five years are 1,000 euros each.
4. The Rule of Residence
This formula can be used to determine whether buying a home in a particular region is more worthwhile than renting a similar property in the same region. It is really important that two similar objects are compared:
According to “moospara.de”, the sales price of the property to be bought is divided by the annual rent for the rental property. The result is the number of years one would live in the rental property at the same cost as buying the other property. If it’s more than 15 years old, you shouldn’t buy it, if it’s less than 15 years old, it’s worth buying.
5. The Capital Doubling Formula
This formula is simple and, according to “moospara.de”, helps to find out when the capital is doubled for which investment: To do this, the number 72 is divided by the annual interest on the capital. The result is the number of years it would take for the rate to double if the interest rate stayed the same. Don’t be alarmed – with the currently very low interest rates, it is unfortunately completely normal to wait several hundred years.
6. The emergency fund formula
It’s important to have a nest egg – but how big should it be? According to “moospara.de” it’s very simple: The penny should cover the expenses for X months, where X is determined using the unemployment rate. If this is around 3.5 percent, it is 3.5 months.
7. The children’s formula (maintenance)
If you want to have children or are faced with a major expense such as investing in a property, you may quickly become unsure whether the costs of maintaining the children can be combined with other expenses or whether the latter should be avoided. As “moospara.de” reports, there is a simple formula to get a rough overview of the maintenance costs of a child:
A child usually costs about 10,000 euros a year. If you multiply this by the number of years you are likely to be financially responsible for the child (the financial support usually ends around the age of 25), you already know how much money you should set aside for child support.
8. The home ownership rule
There is a simple rule for homeowners, according to which at least one percent of the property’s value should be paid into a separate account every year, according to “moospara.de”. This way, homeowners save enough money for maintenance and repairs on the property and don’t have to worry about excessive bills.
9. The Weekly Expense Formula (or: 752 Rule)
This is not a formula that can be used to calculate exact costs – but according to “karrierbibel” it is used to estimate costs and thus estimate what you can afford and which expenses you should rather avoid. This is especially true for regular expenses, such as coffee at lunchtime: Multiplying your weekly expenses for a specific item or activity by 752 gives you the amount of expenses if you make them regularly for ten years. (Tip: This formula also shows savings potential, i.e. how much you would save if you cut out those weekly expenses.)
10. The Monthly Expense Formula (or: 173 Rule)
This rule is similar to rule number 9—it’s all about monthly expenses: Multiplying your monthly expenses for a specific thing or activity by 173 gives you the amount of expenses you would spend on a regular basis for 10 years, reports Career Bible “. Then you should weigh up whether the expenditure is worthwhile or not.
Editorial office finanzen.net
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