Financial Rules of Thumb, revisited

Eight years ago, I posted some financial rules of thumb here:
http://www.truncatedthoughts.com/2011/01/financial-rules-of-thumb.html
 and ones for car buying here:
http://www.truncatedthoughts.com/2013/04/financial-rule-of-thumb-cars.html
and ones for retirement withdrawals here:
http://www.truncatedthoughts.com/2013/09/withdrawal-rate-confusion.html

I found some more -- really ones that overlap with the ones above --- in Patricia Mertz Esswein's  article in the June 2019 Kiplinger's Personal Finance, "When to Swim Against the Tide". https://www.kiplinger.com/pdf/kip/index.php?file=KIP2019_06.pdf#Top (gated)

The 50/30/20 rule

This comes from Elizabeth Warren's 2005 book, All Your Worth: The Ultimate Lifetime Money Plan.

The idea is to spend <= 50% of your take-home pay on musts, 30% on discretionary, and 20% to savings. 

Musts are loan payments, utilities, housing, insurance, transportation, child care, and other things you can't control.

The 20% savings is best handled by doing this automatically, e.g. by having it taken out of your paycheck (like a 401k or 403b) or automatically deducted from your checking account shortly after you get paid -- you can set this up with Vanguard or any similar financial firm.

This leaves you 30% for clothes, travel, entertainment, and other things you don't strictly have to have. 

It's a good rule, but may be hard to do if you are just starting out or have been downsized and are in a job that doesn't pay as much as you were earning.  Plus, you have to balance savings against paying off loans -- If your loans a higher interest rate than what you are likely to make on your investments, then it's probably best to pay off the loans more quickly.

You can afford a home that's 2-4 times your annual gross income

This is basically garbage. It's looking at the wrong thing: you need to look at what your monthly payment will be, which will vary by the interest rate, property taxes, insurance (homeowners and mortgage insurance if your lender requires it).  Can you afford that monthly payment?

Esswein notes the front-end ratio should be at or below 28% (principal, interest, taxes, insurance, any homeowners association costs) of gross income, and the back-end ratio (mortgage and other debt) should be less that 36%-50% of your gross income.

Note that the general recommendation for home maintenance costs is 1-2% of the market value of the housing.

Life insurance at 8 to 10 times annual gross income

That's a lot of insurance. Others recommend 6 to 10 times.  Everyone recommends term rather than whole life.  This amount may make sense when you have small children, and if you died you'd want the surviving spouse to be able to raise the kids without strain.  Personally, I never carried more than 4x -- but that's partly because my savings rate was high, so the savings would cover the slack. When the kids got older and college expenses were taken care of, I dropped life insurance and put that money into retirement savings.

Save one-third of the college sticker price

The idea is that you'd pay for a third out of savings, a third out of current income, and borrow a third. That's fine if you can afford it, but this should be after you've done an adequate amount of retirement savings.

You'll need 70-80% of your pre-retirement income to retire

That's very rough. As you get within 10 years of retirement, tote up your actual expenses, put them into rough categories, and see what expenses go away. Also, see what expenses will increase. If you plan on travelling more, allow for that.

100% - your age should be in stocks.

As Kiplinger notes, this rule should be retired.  People live longer now, and if your investments are too conservative you can run out of money.

If we look at the approach taken by the large financial firms in their target retirement date funds, we can see that they aren't following this.  I'm 69, so that would suggest I should have only 31% in stocks.  But if we look at the target retirement date funds for 2015 (i.e. assuming you retire at 65 in 2015) we see far more in stocks:  Vanguard is 41% in stocks. T Rowe Price is 44% (they also have a second 2015 Target fund with 38% in stocks). Fidelity has 48% in stocks.