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":
- The annual growth rate of the investment
- The current amount of money invested
- 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.
In a tight economic time, a lot of people are getting very creative about how they spend their time and money. Let's face it, we all want to have fun – even more so when the money is tight and times are stressful! Here are some ways that I have seen people having fun and it is costing them NOTHING (or next to it).
- Pick-up basketball games at the local park
- Library visits – just to peruse the books, magazines, and check out free movies
- Bake a new dish using stuff that is already in the pantry and freezer
- Take the train downtown to people watch – I LOVE doing this in Chicago!
- Pull up Hulu.com and catch up on some old shows (like T.J. Hooker!)
- Start a blog
- Dig up some trees out of a ditch and transplant them into your yard
- Take time to pet the dog and cat
- Volunteer at a local community center, food pantry, or animal shelter
- Clean up the yard
- Attack one room in the house and reorganize it
Those are a few ideas. What are your favorite things to do that cost little or no money?
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So that's it for the Top 5 Things People Lack In Their Financial Plan series! I hope that it has been a help for you. Below is a recap of the Top 5 Things (plus the Bonus one).
- A monthly written spending plan
- A plan to get out of debt
- A written will
- Term life insurance
- Savings account (with money in it!)
BONUS: Health Insurance
Over the past two and a half years, this crusade has been able to reach tens of thousands of people. I was recently reflecting on the top things that I see most commonly lacking in folks' financial plans. So here are the top five things I see lacking.
BONUS for self-employed Health Insurance
I know what you are saying already. You are saying, "It is so horribly expensive!" I would say, "I KNOW it is horribly expensive, but it is way MORE EXPENSIVE to NOT have health insurance."
Half of all bankruptcies are due to medical bills. Why did the medical bills happen? Because of the lack of health insurance.
I personally like High Deductible Health Plans (HDHP) with an attached Health Savings Account (HSA). The cost of this insurance is much more affordable, and, frankly, it is a better deal for the consumer!
I really like eHealthInsurance's interface for finding insurance. You only have to provide basic information (and not your contact info – yay!) unless you want to share more info!
Check out the health insurance quotes HERE.