Archive for April 2009

Rule Of 72

Have you ever heard about the "Rule of 72"?

It is utilized to quickly provide a rough calculation of how long it will take your investment to double.

You need to know three things to use the "Rule of 72":

  1. The annual growth rate of the investment
  2. The current amount of money invested
  3. The amount of time (in years) the money will be invested

NOTE:  This rule does not include any additional contributions you make to your investment.

Here is how it works.  You divide 72 by the annual growth rate of the investment.  That tells you how many years it will take for the investment to double.  Then divide the number of years it takes to double into the amount of time the money will be invested.

Here is an example.  Let's say that you have $40,000 invested growing at an average of 8% a year and that it will be left alone for 36 years. We divide 72 by 8 and that tells us that the investment will double approximately every 9 years.  We divide the 36 year investment period by the time it takes the investment to double (9 years), and we find that the investment will double approximately 4 times.

So let's do the math and double the invest FOUR times.

Double Once:  $80,000 

Double Twice:  $160,000

Double Thrice:  $320,000

Double Four Times:  $640,000

Please note that this is an approximation.  The actual calculation is more difficult, but using the Investment Value Calculator HERE we find that the actual amount would be $705,793.

The point is to get a close approximation really fast. 

Top Reasons Budgets Fail

I have seen a lot of people prepare a written spending plan, and then fail to follow that plan.  At first blush, one would want to say that the people just did not have the discipline to stick with the plan.  As an engineer, I am always seeking to understand the root cause of someone's failure to stick to their budget.  So here are some of the top reasons that I see budgets fail.

  • Not having a budget.  That was too easy, but it is true!  Fail to plan.  Plan to fail.
  • Extremes – no spending money, $3.21 for groceries for the month, and no fun in the plan
  • Spouse refusing to participate in developing the spending plan
  • Spouse not asked to participate in developing the spending plan
  • No saving in the plan – this allows emergencies to totally derail the plan
  • Known upcoming expenses are not funded so they become budget busters when they do happen – Seriously.  Christmas IS going to happen!
  • Can not say "NO!" to children
  • No giving.  This is something I clearly see in financial counseling appointments.  Those who give are much better off – and it is not income related.

Maybe you can add some to this conversation in the comment section.  Better yet, maybe you can share how you have overcome these issues.

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Crusade Headed To Virginia

The crusade is heading to Virginia this weekend!  Here is the line-up.

Saturday, 4/25/2009

9AM – 2PM

6PM – 8:30PM

Sunday, 4/26/2009

10:10AM

  • Speaking during the morning service  The Community Fellowship – Collinsville, VA
  • Talking about money 🙂

1:30PM – 4:00PM

I CAN NOT WAIT!

See more upcoming events by clicking HERE

I Know Everyone Can

If there was a phrase that could capture my heart for this crusade to help others accomplish far more than they ever thought possible with their personal finances, it would be this …

"I KNOW everyone can …"

Why do I travel the nation speaking and teaching on personal finances?  Because I KNOW everyone can …

  • prepare a written spending plan every single month
  • become debt-free
  • save money by asking for a better deal
  • improve their relationships by talking about their plans, hopes, and dreams
  • save money for emergencies, known upcoming expenses, and dreams
  • help their children avoid financial mistakes we have made
  • put money in its proper perspective
  • give more money away

I KNOW everyone can DO THIS!  You CAN do this!  Even when it is hard.  Even when faced with huge temptation.  Even when no one else is doing it.  Even when others tell you that you are crazy.  Even when the kids are demanding more.

You CAN do this.

Refinanced Your Mortgage?

I refinanced my house recently from 6.25% to 5.00%.  I did not pay any points and the cost of the refinancing will be recovered in less than seven months.  It was a no-brainer.

I have several friends who have refinanced as well.  Many of them report that they have obtained 4.75% interest.

People with 80/20 mortgage arrangements are discovering that they are saving a TON of interest by refinancing and obtaining a conventional first-mortgage only.

Have you refinanced?  Have you considered it?  It can cut YEARS off the repayment or it can provide margin in a very tight budget.

I really like the refinance calculator over at CNNMoney HERE.

Check it out, and then let everyone know what type of deal you got!

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