Summary of “18 useful financial rules of thumb ~ Get Rich Slowly”

After twelve years of reading and writing about money, I’ve come to love financial rules of thumb.
Financial rules of thumb provide helpful shortcuts for making quick calculations and decisions.
Financial rules of thumb don’t always hold true.
In the past, you’ve probably seen my rant about some of my most-hated financial rules of thumb.
How much should you spend on a house?As I mentioned last week, another rule of thumb that makes me cranky is this common guideline espoused by all sectors of the homebuying industry: “Buy as much home as you can afford.” No no no no no! Of all financial rules of thumb, this is probably the worst.
Financial rules of thumb usually aren’t this bad. In fact, most are useful.
Building on the above, Mr. Money Mustache’s shockingly simple math behind early retirement gives us a useful rule of thumb for determining how long you’ll need to save before you’re financially independent.
What rules of thumb did I miss? Do you disagree with any of those I suggested? What are some of your favorite rules of thumb?

The orginal article.

Summary of “Don’t cheat yourself with the 4% rule”

It’s a rule of thumb that says you can withdraw 4% of your portfolio value each year in retirement without incurring a substantial risk of running out of money.
Unless we see the return of a Great Depression era, followers of the 4% rule “Will most commonly just leave a huge amount of money left over,” says Michael Kitces in his research piece, entitled “How Has The 4% Rule Held Up Since The Tech Bubble And The 2008 Financial Crisis?”.
In addition to being incredibly conservative, the 4% rule does not consider other sources of income you have and the timing of when each source begins.
Why scrimp by only withdrawing 4% of your portfolio while waiting for Social Security? It often makes more sense to withdraw more than 4% during that window of time – yet many retirees won’t do this because the popularized rule of thumb has made them fearful that they’ll run out of money if they don’t follow the rule each year.
It’s much easier to write about a rule of thumb or sensationalize the latest stock market gyration.
Be cautious of a financial adviser who uses a rule of thumb to determine your retirement withdrawal amounts.
There is nothing unprofessional about using a rule of thumb to set broad, general expectations.
Retirement is the biggest financial decision you’ll make and you need a customized plan, not a rule of thumb.

The orginal article.

Summary of “Solving Hard Problems With Simple Ideas ยท Collaborative Fund”

To wrap your head around how good we are at solving hard problems with simple solutions, consider how much of a mathematician you need to be to catch a baseball.
Every bit of the complex formula is buried in that rule of thumb.
De Groot knew that what made a chess master had to be something soft and instinctual like psychology, rather than hard and learned like math, if only because there are more 12-year-old chess prodigies than there are 12-year-old physics pioneers.
“People like working with me” is a rule of thumb that can capture the complexities of someone’s technical ability, work ethic, and problem-solving capabilities better than more complex metrics.
Buffett and Munger have distilled it down to a handful of rules of thumb, acquired over decades of experience, that appear simple yet capture some of the most complex attributes of business and market behavior.
Another is realizing that using rules of thumb frees up time compared to digging into complex solutions, and that time can be spent learning about even more helpful rules of thumb.
Rules of thumb give you time to learn, and learning gives you rules of thumb.
Most important is accepting that when you’re dealing with uncertainty and complexity, simple ideas are not dumbed-down ideas.

The orginal article.