Stocks, Forex and Other Money Matters

“The most powerful force in the universe is compound interest,” said Albert Einstein. It is expressed in a mathematical formula called the Rule of 72.

While Albert Einstein is really more popularly known for discovering the theory of relativity, some people say that the Rule of 72 is his more important discovery. The Rule is said, however, to have been in existence long before Einstein was born. The general consensus is that Einstein made the rule popular.

One of the most basic rules that investors should know is the Rule of 72. This rule is used to determine how many years it would take for money to double.

It is very simple to do the math using the Rule of 72. Just divide 72 by the interest rate and it will equal to the number of years it will take your money to double. But the uses of this rule is not only limited to investments. It can also be used to manage your debts intelligently. The following is how the Rule of 72 can be also written: 72 / interest rate = number of years for your debt to double

As you can see, the Rule of 72 can also be used to find out the number of years your debt will duple. Whether that debt is by credit card, loan or mortgage, the Rule of 72 can be used.

Let us make a case in point using credit card interest rates. Most credit card companies here in the Philippines have 3.5% interest rate that amounts to 42% interest in a year. Now we divide 72 by 42 and the resulting answer will be the amount of years it takes for your credit card debt to double. (72 / 42 = 1.7 years or 20/4 months).

So how will this help you? Even if the information above is not as precise since you will probably be paying some of your credit card debt, however, our illustration shows just how much credit card debts grow so fast. Now knowing that your credit card debt doubles every 21 months, you will be more convinced to pay up your credit card debt as soon as possible.

To learn more about the Rule of 72 visit the blog of Zigfred Diaz where he talks about other topics including debt management.

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