The rule of 72 is a simple and helpful math trick to help you calculate the number of years it will take to double your invested money. All it requires is a basic division problem that you can probably do in your head.
The equation is:
Number of years = 72 / compound annual interest rate
Time out—what's the compound annual interest rate? It's the annual rate of return on your investment, applied to the original principal and to the accumulated interest from previous periods. Compound interest is the engine that will boost your investment to its goal.
Here's an example:
You want to double your investment in a mutual fund that you estimate will return 8% annually. Plug the interest rate (as "8") into the equation:
# of years = 72 / 8
The answer is 9. This means that your money will double in 9 years with an average return of 8%.
The equation works in the other direction, too. If you want to calculate the interest rate needed to double your money in 12 years, you plug 12 into the left side of the equation:
12 = 72 / x
Divide 72 by 12 and the answer is 6. You'll need an annual return of 6% to double your money in 12 years.
The rule of 72 provides an estimate that is extremely close to the exact answer for rates under about 11%. A few percentage points above that, it's better to use 73; a few above that, 74; and so on.
The key to the equation and your returns is annually compounding interest. It works because the interest gained in the previous year grows your investment, boosting the return for the following year. The cycle continues to grow your investment, increasing returns proportionally.
In the first example above, it takes you 9 years to double your investment at an 8% average annual return rate. If your investment is $1,000, you will have $2,000 after 9 years with compounding interest.
Let's say that your investment really did earn 8% every year (an average return rate doesn't necessarily mean that this will happen, but that the end result will be the same as if it did). After 1 year, your investment has earned 8%, or $80.
Now, your investment is $1,080. You earn 8% the next year, too, but this time you're earning 8% on $1,080, not $1,000. So your 8% return for the second year equals $86.40. Your investment has grown to $1,166.40 in two years. This is compound interest in action.
Its effect is drastic. If you'd decided to withdraw the return each year and spend it, instead of letting it compound, your returns would be much different. You still earn $80 after one year, but you take it home and spend it. Your investment stays at $1,000 for the second year, so you earn another $80 that you take home and spend.
You earn the same $80 every year for the nine years it should have taken you to double your money and what is your total return? $80 * 9 = $720. That's $280 dollars less than you would've made with compounding interest. If your investment was $10,000, you would have lost $2,800.
That's a significant difference. The rule of 72 uses the compound annual return rate to help you estimate length of time and rates of return for you to double your money. It's a valuable tool to help you set investing goals that you can achieve.
Airbnb is a great option while traveling, but you should protect yourself from damage charges from unscrupulous hosts.
Airbnb offers an affordable option for people looking to be more comfortable as they travel.
However, there are downsides to staying in a host's home rather than a hotel. Whereas hotels are designed for constant streams of visitors and often have furniture built to last, at an Airbnb, you may be staying on old or cheap furniture that a host is using in order to maximize their profits.
And while most reputable hotels will have regular room inspections from staff to check for any wear and tear, Airbnb damage disputes are oftentimes he said, she said situations. If you are in an Airbnb and something breaks, there are a few steps you should take in order to ensure that you are not on the hook for damages out of your control.
If you're keeping tabs on the art and tech worlds, you've probably been hearing whispers about "NFTs" for the past month. Just over the past week they've entered the mainstream lexicon.
Twitter founder Jack Dorsey made the news for selling his first ever tweet. The app has been teasing paid subscription models and newsletter-like features, but tweets for sale is "the next frontier."
just setting up my twttr— jack (@jack)1142974214.0
The 2006 tweet went up for auction as an NFT, and the current bid is $2.5 Million. But what does it mean to own that? Why would anyone want to? And what even is an NFT?
Long gone are the days when the majority of Americans dreamed about owning a home with a white picket fence.
The traditional American Dream may be on its deathbed, but that doesn't mean a core component of the vision can't survive. It simply takes a diverse perspective. People can still believe they can attain their own vision of success in society with hard work, knowledge, and risk-taking. Investing in today's American Dream may literally mean investing money in our modern economy, starting with our infrastructure.
Real estate investing in particular is a lucrative method that can boost income and secure a better financial future for many. There's always risk involved, but the payoffs can far outweigh the uncertainty. Selecting solid financial investments is about confidence and competence. If you're looking for some advice on this kind of investment, here are a few savvy tips for new real estate investors.
Stick To a Specific Strategy or Niche
Real estate is a challenging sphere of the business world, one that requires several key skills: groundwork knowledge, networking, perseverance, and organization. True knowledge of the real estate market will come with time and experience, but it's a smart idea to select one area of the market and stick to it. This is the best way to attain in-depth familiarity with your specific niche.
First, choose a geographical area close by and then a niche strategy within it, such as house flips, rental rehabs, or residential or commercial properties. By doing so, you can become aware of current inner working conditions in the market and you'll have a better idea of how these trends may change in the future.
Be Vigilant About Viable Financing Options
While it takes money to make money, you don't have to use all your own money. A common misconception about real estate investing is that you must be wealthy to start off. This isn't straight fact, however. A majority of people can test the waters of real estate investing without a lot of initial cash in their pocket.
Aside from traditional financing options from banks and institutions, private lending options can be worthy solutions. Hard money lenders are popular, reasonable choices, and they tend to have fewer qualification requirements upfront. However, be sure to strategically choose a hard money lender to find the best possible fit.
Master the Art of Finding Good Deals
There may be hundreds of thousands of available properties for sale on the current market, but the bulk of them will never amount to the final money-making result you desire. Another great tip for new real estate investors is to use good math to estimate profit. Taking risks is part of the process, but you have the ability to analyze properties and use networking sources to find the greatest deal. You can't win every deal, but you can steadily work towards a thriving financial future.
