The Rule of 72 and More Simple Financial Ideas
Today I finished a financial class called Surviving Financial Meltdown - Confident Decisions in an Uncertain World. The primary author of the class, Ron Blue, is a very good teacher. He's explanations are calm, thoughtful, funny and financially sound. Ron has a "keep it simple" approach, and supports his ideas with verses from the Bible and his personal experiences.
Here is Ron's basic approach to financial management:
1) Think long-term with goals and investing
2) Spend less than you earn
3) Maintain liquidity (or emergency savings)
4) Minimize the use of debt
In addition to these four basic principles, I also learned about the simple rule of 72. I don't know how I never stumbled upon this rule before. The Rule of 72 is a quick way to estimate the time required to double your investment. For example if you $1,000 dollars earning a 6% return. You divide 72 by 6, which means it would take 12 years for your $1000 dollars to become $2000 dollars.
As a result of this class, I'm working to streamline the amount of financial accounts down to one or two financial institutions. I created a budget using Mint.com, and I have a goal to do some estate planning as soon as possible.
Feb.03.2010.
Jim Finfera on Feb.04.2010.
Hi Adam!
Great summary. The key to financial security and success is rule #2: Spend less than you earn. Another way to put it is to live below your means. My one son does this very well! It is a great principle of life!
Jim :)
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