Trick to double your money - never double your debt

The "Rule of 72" is a quick and simple formula used to estimate the number of years it would take to double your investment at a fixed annual rate of return. The formula is:

For example, if you have an investment with an annual return of 8%, it would take approximately 72/8=9 years to double your money. Your $1000 will double in 9 years at 8% interest.

This is my favourite "never double your debt" is an extension of this rule, emphasizing the importance of managing debt responsibly. The idea is that while you might aim to double your investments using the Rule of 72, you should be cautious about letting your debt double. In other words, it's a reminder to avoid accumulating debt at a rate that could quickly become unmanageable.

Your debt can double for the same reason if you borrow $1000 at 8%, forgotten to pay it off (despite many reminders from your credit card company), your debt will now become $2000 in 9 years.

However, we know that credit card interest rate is 24% upwards (now is 25.9% to 26.9% as of this writing)

If you borrow $10,000 at 25%, forgotten to pay, it takes about 34 months or 2.9 years to owe them $20,000. Is faster that your salary growth can keep up.

While the Rule of 72 is a useful heuristic for estimating investment growth, it's essential to note that it provides an approximation and doesn't account for factors like taxes or fluctuations in the rate of return.

Personal Opinion Disclaimer:

The opinions expressed here are solely my own and do not constitute financial advice. I am not a licensed financial advisor, and the information provided is based on my personal experiences, research, and perspectives.

It's important to recognize that individual financial situations vary, and what works for one person may not be suitable for another. Investment decisions should be made after careful consideration of one's own financial goals, risk tolerance, and circumstances.

I encourage readers to consult with a qualified financial professional for personalized advice tailored to their specific needs. My views and opinions may change over time, and I assume no responsibility for any actions taken based on the information provided.

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