In financial planning application, most have heard about Rule 72. It’s an useful estimate to double your money at a given time.
To estimate the time it will take to double your money, divide 72 by the expected growth rate, expressed as a percentage.
For example, if you expect to earn 10% per year on a $10,000 investment, it will double to $20,000 in about 7.2 years (72 / 10).
How about triple your money?
Apply Rule 114. It can be used to determine how long it will take an investment to triple.
For example, at 10% an investment will triple in about 11 years (114 / 10).
Naturally, you will think of quadruple your money!
Use Rule 144, you can guess that it’s a “double-double” effect of Rule 72.
So at 10%, an investment will quadruple in about 14.5 years (144 /10).
How about Rule “73.5”?
There is no such rule.
Personally, I have improvised to have a quick estimate on the annual investment where the numbers of times the interest rate equals 72, the ending value will equal approximately 1.5 times the amount invested.
So Rule “73.5” is based on 72 + 1.5.
For example, investing $10,000 per year for 8 years at 9% interest (8 * 9 = 72), the value of the investments at the end of year 8 will equal about $120,000 ($10,000 * 8 * 1.5).
To check the “accuracy” of this Rule “73.5”, punch a few buttons on the financial calculator, you will get the values FVAD (pmt=-$10,000, n=8, i%=9, BGN) = $120,210!
Bingo! A great estimate, isn’t it?
Keen to learn more?
Chew Hock Beng is a Certified Financial Planner, Chartered Financial Consultant, Chartered Life Underwriter & Chartered Family Office Specialist. He has community involvement experience and has held appointments like Honorary Treasurer & Exam Board Chair with Financial Planning Association of Singapore (FPAS), Education Sub-committee with IFPAS, PSG Chairman. Hock Beng is a certified IBF instructor with Financial Perspectives and an Adjunct Trainer with Falco Academy. Currently he is managing a team of independent financial adviser representatives, providing training, mentoring & coaching.