I think I have shared this earlier but since it’s a new year and people will be working their financial goals for the year, I thought it’s a good time to refresh the #Rule72 .
If you find it useful and believe like me that’s it’s #TooGoodNotToShare kindly retweet ...
If you find it useful and believe like me that’s it’s #TooGoodNotToShare kindly retweet ...
#WhatIsRule72
In personal finance, if we divide the number 72 by the rate of interest, we do get to know the number of years it will take for us to double the money.
For example if the rate of interest is 9%, simply divide the number 72 by 9% and the answer is 8.
In personal finance, if we divide the number 72 by the rate of interest, we do get to know the number of years it will take for us to double the money.
For example if the rate of interest is 9%, simply divide the number 72 by 9% and the answer is 8.
Thus it will take 8 years to double our money if you invest at 9% p.a. rate of interest.
We can use this rule in reverse to know the rate of interest needed to double our money to achieve our set goal.
If we have 2.5 lakhs today and you need 5 lakhs in 5 years.
We can use this rule in reverse to know the rate of interest needed to double our money to achieve our set goal.
If we have 2.5 lakhs today and you need 5 lakhs in 5 years.
Just divide the number 72 by 5, the answer is 14.41%. Thus we need a type of investment avenue, where we earn at least 14.41% p.a. as rate of interest/returns to double investment amount in 5 years.
This 'Rule 72' also helps to understand about inflation.
It helps to calculate the amount of time it will take for inflation to make the real value of money half.
Let's say present inflation is 5.5%. When we divide 72 by 5.5% the answer is 13.09 years.
It helps to calculate the amount of time it will take for inflation to make the real value of money half.
Let's say present inflation is 5.5%. When we divide 72 by 5.5% the answer is 13.09 years.
That is to say, if we have one million in our kitty today, it would take around 13.09 years for the value of the money to be halved..
Hope it will help in day to day investments and other finance related activities.
Hope it will help in day to day investments and other finance related activities.
In case of confusion I know someone who can assist you plan your savings and investments for a better tomorrow. Pl do not hesitate to contact @Shareee
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