Financial Fridays – Rule of 72

When it comes to investing the longer you invest has a huge impact on what you will have saved for retirement at the end of your life. The earlier you start, the better. However, another important factor is what you invest in. This is where people have the most problems. People often times think they can beat the market. Here is a simple rule that will help you to realize just where you need to put your money based on time in the market and what your end goal may be.

The Rule of 72 is simple. It is an approximation of how many years it will take for your money to double. The higher the interest percentage, the quicker your money will double. Here is a chart based on a one-time investment of $10,000 to show this rule:

Rule of 72

The better the interest rate invested is and the longer you are in the game, the better your chances of hitting your goals. Everyone knows this, but until they actually see it, they don’t get it. There are plenty of investments and mutual funds out there that have averaged 10-12% for their lifetime in the market. Here is what I suggest for you.

1. Contact a Financial Adviser to discuss your goals and possible investment strategies for you.

2. Go home and sleep on the decision. Do NOT invest right there on the spot. Look at your options and if you do not understand what you are investing in, don’t do it!

3. Look at your monthly budget and find an amount to begin at that won’t shake up your monthly budget too much. Commit to investing this amount for at least 6 months to 1 year. Don’t over do it to start, even $50 invested now monthly will benefit you far greater than waiting 2 years and investing $100/mo then. 

Just get started. The longer you are in the market and the better rate of return you are invested in will help you achieve your future goals.


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