Follow Rule 72 And You Will Become A Millionaire

Robert Reich, once observed ‘most minimum wage workers aren’t poor.’ He is right.” - Johny Isakson, U.S Senator (Robert Reich is former U.S department of Labor Secretary) Minimum wage earners keep complaining about their salary. They say they cannot retire rich. Most of them just go through their work and retire relying only on their small SSI pension and the little retirement that their company will be giving them. For most minimum wage earners, becoming a millionaire when they retire is quite an impossible dream. They contend that they can only be a millionaire if they receive a hefty sum of retirement money from their company.

Is it really possible to achieve millionaire status by your own efforts alone ? (Humanly speaking) Let us consider this actually scenario.In the Philippines, Central Visayas Region, the current minimum wage is P 241.00. Multiply it by 26 days of work you get P 6,266.00.Let’s just say that you are 30 years old and you faithfully saved that P 266.00 per month and spent the rest of the P 6,000.00, that would amount to P 3,192.00 per year do the math. If you put that P 3,192.00 in an investment vehicle that would give you 10 % interest per month in interest (compounded), do you know how much your money would become in 30 years, that would be P 1,052,001.00. If you started this kind of savings program when you were 30 years old you will retire a millionaire at 60 years old by your own savings program alone, add to that the retirement benefits from your company, your monthly pension from the SSI and your PAGIBIG “savings.”What if you decided to add another P 500.00 in your monthly investment and invest P 766.00 instead? This would amount to P 9,192.00 per year and at the end of 30 years it would amount to a whopping amount of P 3,029,447.00 (At 10 % interest per year compounded)Perhaps later on you would increase your savings to P 1,766.00 a month if you receive a salary increase.

If you do that even on the 10th year after you start saving only P 266.00 a month, you will retire with P 4,472,777.00.The growth of your money is possible because of what we know in the world of finance as the Rule of 72. Albert Einstein’s greatest discovery was not the theory of relativity, it was the Rule of 72. (Although some people say that the rule existed long before he was born, most would agree however that he has popularized it)What has the Rule of 72 have to do with investing and growing your money ?Basically knowledge of the Rule of 72 is the basic building block of learning that each budding investor should have. Simply stated the Rule of 72 helps you determine the following:1.) What interest rate you should avail of in order for your money to double quickly.

How many years does it take for your money to double.In a nutshell the Rule of 72 is stated as follows:72 divided by interest rate return = No. of years it takes for your money to double. So, if you put P 100,000.00 in a bank account, it will take 72 years for your money to become P 200,000.00 since the bank only offers a 1 % percent interest rate. (72 divided 1 = 72)Let’s say you get a little wise and you put your P 100,000.00 in a time deposit account it will take 18 years in order for your money to become P 200,000.00 (72 divided by 4 = 18) Basically the higher the interest rate the less number of years your money will it take for your money to double.So if you put your P 100,000.00 in an instrument that would give you a 12 % interest rate it will only take 6 years for your money to double (72 divided by 12 = 6) However take note that the Rule of 72 is more accurate with lower interest, the higher the interest rate rises the more inaccurate it becomes. (An example of this is that if you earn have P 100.00 an invest it in an instrument at 72 % interest rate per year according to the Rule of 72 your money will become P 200.00 in 1 year. However this is not entirely accurate since you will need a 100 % interest rate in order for it to become P 200.00 in 1 year time)Interested in how many years would it take for your money to TRIPLE and what should be the interest rate that you should avail of? then you should use the Rule of 115. It works basically the same way as the Rule of 72, just substitute 72 with 115. Earning the minimum wage ? No problem with the Rule of 72, You could be a millionaire !


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| September, 3rd, 2016

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