Albert Einstein once called compound interest the “8th wonder of the world.” But did you know that this powerful concept can work both for and against you? Enter the Rule of 72—a simple formula that can help you understand how long it takes for your investments to double, but also how quickly your debt can grow if left unchecked.
What is the Rule of 72? The Rule of 72 is a quick way to estimate the number of years it will take for your money to double at a given annual rate of return. Just divide 72 by the interest rate. For example, if you have an investment with a 6% annual return, it will take approximately 12 years to double (72 ÷ 6 = 12).
Applying the Rule of 72 to Debt While the Rule of 72 is often used to highlight the benefits of investing, it also serves as a stark reminder of how quickly debt can spiral out of control. If you have a credit card with an 18% interest rate, your debt will double in just 4 years (72 ÷ 18 = 4). This is why high-interest debt can be so dangerous and why it’s crucial to pay it off as quickly as possible.
Why Should You Care?
Financial Awareness: Understanding the Rule of 72 can help you make smarter financial decisions, whether you’re investing or managing debt.
Debt Reduction: By knowing how quickly your debt can grow, you can prioritize paying it off and avoid the trap of compounding interest.
Investment Planning: Use the Rule of 72 to set realistic goals for your investments and understand the power of compound interest.
Remember, there is NOBODY more interested in your financial future than YOU are, definitely not the government or your employer. It’s your responsibility to learn the simple rules of how money works and I'm here along for the ride as your guide on the side.
My September📆 calendar is OPEN for FREE Personal Finance Strategy (PFS) Sessions.
These FREE sessions are designed to help you:
📍Get rid of debt (no more sleepless nights)
📍Budget more (tell your money where to go instead of wonder where it went )
📍invest more (make your money grow)
📍save more (create generational wealth)
📍 give more (more impact for the kingdom of G-d)
ACTION STEP: Do you want to learn more about how money works and how to build a stronger financial foundation❓ Drop a 💰 money bag below in the comments to reserve one of the FREE Personal Finance Strategy (PFS) Sessions.
Click the link below to schedule your session today!
⬇️
Commentaires