5 per cent
Based on the above example, you’ll find that while this person had $4,000 in his budget to start with, he’s only able to comfortably afford an insurance plan that costs up to $200 or 5 per cent of his take-home salary, assuming that he/she is not going to compromise on savings or investment.
This is considerably lower than if we were to apply the purported “10 per cent to 20 per cent” rule to this budget breakdown.
Even by allocating the minimum 10 per cent of his income for insurance, it would’ve exceeded his comfortable budget and could possibly even affect his cash flow.