Tuesday, April 15, 2014

The Rule of 72

I'm going to have a short blog entry this week.  I came down with a sinus infection or the flu or something, so I'm going to post something I posted on my Facebook page "Angiece"   because, frankly, it bears repeating.

The Rule of 72

If you divide 72 by the interest rate you are earning on your money, you can find out how long it would take to double your money.

To make it easy to understand, use 10% (although pretty much nobody is earning that.)

72/10% = 7.2
so you would double your money every 7.2 years ....

Back before 2008, ING and other online banks were offering 4% ...... so we can guesstimate you would have doubled your money about every 16 years .... but .... the high interest rates only lasted a couple of years.

Meanwhile, if you think about your debt, your mortgage or your credit cards, those interest rates represent how quickly the financial institution making the loan stands to DOUBLE THEIR MONEY.

For a lot of Americans, even if they do have savings, it is in a bank earning less than 1% nowadays.

While the wealthy have the knowledge and resources where, if the savings accounts only pay what they are paying now, they move their assets someplace else.

Sometimes the stock market actually has dips simply because the wealthy have seen an indicator that told them it was time to move their money.

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