Magic Rule of 72

Have you ever wondered how long it would take your money to double? There is a guideline to figuring out the time called the "rule of 72." How you calculate it is by taking the amount of interest you are earning and divide it into 72. For instance, if you were earning 9% interest you would take 72 and divide it by 9.

72/9 = 8 periods

So at a compound interest rate of 9%, you would double your money in 8 compounding periods, which is usually measured in years.

Back in 1791 Ben Franklin left $5,000 to the city of Boston and instructed them to let it grow for 100 years. In 1861, it had grown to $322,000. During that year, they decided to build a school with most of the funds, but set aside $92,000 for 100 more years. In 1960, the $92,000 had grown to $1,400,000. It's unlikely that you will have 100 years to let your money grow, but the rule of 72 can help you see how long it would take money to double. Below is a sampling of interest rates and how long it takes to double.

Interest Rate	Years to Double
0.5%	144.0
1.0%	72.0
3.0%	24.0
5.0%	14.40
7.0%	10.286
9.0%	8.0
12.0%	6.0

Wishing You Wealth in all Greatest Forms,

Alex

Great Depression Revisited

Some of the wisest individuals today are the seniors that witnessed the stock market crash in 1929. After the crash, panic stricken consumers feared that they would lose their life savings at the banks. So they went to the banks, became a mob and attempted to withdraw their money simultaneously. With so many people trying to make total withdrawals, it resulted in banks not being able to meet the cash demand. Some were able to retrieve all their money, while others didn't receive one cent. Many banks failed in the weeks and months that followed. Does that sound familiar? Subsequently, in 1933 the FDIC was created to protect consumers and instill public confidence.

Beyond bank failures, the general business climate soured while commercial and residential construction declined over 60%. Businesses failed since people didn't have any money to buy the goods and services that were once necessities. During these times, banks did very little lending since they had little confidence that customers would be able repay the loans with high unemployment. During this time of massive unemployment, there was no welfare or unemployment insurance.

If you speak to an elder who lived during this time, you'll soon realize that the recession that we are experiencing today is minor in comparison. It might seem like dark days, but we now have programs designed to protect us when we are unemployed, when we are hungry and protecting our hard earned money in the chance that a bank fails.

It's easy to take these things for granted and feel as if the government isn't doing enough. The United States is down, but it is NOT out. I am looking forward to the recession ending, yet will continue to treasure each learning lesson that it provides.

Wishing You Wealth in all its Greatest Forms,

Alex

How the Wealthy Really Live

Since my youth, I have always wondered about the difference between the wealthy and those that struggle and live paycheck to paycheck. Later in life, I was surprised to learn that it was much more simple than I realized. Those that are wealthy don’t always make more than the average American. The biggest difference is how they live their life.

1. They follow the plan

A financial plan is the most important part of getting on the path to financial freedom. Too often, we set goals for ourselves and fail to reach them because we don’t stick with it. The wealthy not only have a plan, but they follow the program. When we are consistent with our actions, they become habits. If you could develop one positive financial habit a week, imagine where you would be in just one short year. Those that are wealthy are diversified in their investment plan and have implemented sound insurance, tax and financial strategies and are willing to put off instant gratification for long term results.

2. They are penny-wise

The wealthy who have worked hard and developed their prosperity over time have also developed an attitude of frugality. They realize that every penny invested or spent wisely will bring about more pennies, which will bring about dollars. Those that are truly wealthy have the ability to discern between a need and a want and spend their dollars accordingly.

3. They ignore social prominence

The world’s “average” millionaires live rather simple lives. They tend to own their houses outright and drive older cars. The poor tend to rent and drive expensive automobiles. Those that are truly wealthy are that way because of their habits. Often times, you would never know their wealth by the way they dress, drive or live.

Every person can become wealthy if they take the time to cement those habits that allow them to become that way. We all have choice in our lives and you can choose to live a life of prosperity or a life of lacking. Take the time today to build positive financial habits.

Wishing You Wealth in all its Greatest Forms,

Alex