Rule of 72
Jan27Written by:
1/27/2009 7:30 PM 
The only good debt is Paid-in-Full Debt.
Debt reverses the Law of Use and actually becomes Compound Interest in Reverse.
Rule of 72:
Regardless of what we have been taught, the only good debt is Paid-in-Full Debt. Debt reverses the Law of Use and actually becomes Compound Interest in Reverse. Instead of the bank having to compound the interest of your money and add that increase to your balance (savings), they get to charge you interest on your borrowed dollars and add that increase to your debt.
Rule of 72:
The rule of 72 tells you the number of years it takes to double your money regardless of the interest rate. In reverse it also tells you the true costs for credit by the same rule.
Divide the number 72 by the annual interest rate. The resulting number tells you how many years it will take to double your money or how many years it takes for you to have paid twice as much as the purchase price of any item you bought with a credit card.
The key principal is that over time a small improvement in the interest rate for savings and the additional time for doubling will exponentially multiply your investment. That is why it seems that banks are basically a business with a license to steal. They actually DO have a license to STEAL from you!
- Banks will take our savings money and pay a mere 1% interest
- Then give us a loan (of our OWN money) back via a credit card balance and charge us 18% interest.
3. Now the bank has made 17% interest profit on money they didn't even have to provide.
Compound interest is similar to a snowball rolling downhill, quickly getting larger with each turn. You can choose to run from the snowball and eventually get squashed (carrying balance on credit cards) or you work into position behind, pushing the snowball (investing your funds). In every financial transaction there is a master and a slave. Choose wisely.
Let’s Do the Math!
Notes: 72 Divided by % of Interest equals the # of years necessary to double your investment.
Example:
Savings: 72 divided by 3% =
24 years to double:
$1000 would become $2000.
Credit Card Balance: 72 divided by 18% =
4 years to PAY double
$1000 purchase costs YOU $2000 in 4 years, or $4000 in 8 years
Why wouldn’t you pay off debt instead of having excessive savings with any money you may have left over in your spending plan?
Summary:
Quit Spending Money
you don’t have!
Copyright ©2009 Ray Noftsinger
3 comment(s) so far...
a proposal for the webmaster
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By Erica Smith on
4/1/2009 3:26 AM
|
Re: Rule of 72
Hello Erica:
Sorry to be so late getting back to you. I will be glad to get your info to our webmaster for linking.
Thanks,
Ray Noftsinger
By Ray Noftsinger on
6/2/2009 10:38 PM
|
Re: Rule of 72
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By Debt Help on
10/14/2009 4:44 PM
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