I think everyone should understand rule of 72.
It simplifies finance and brings a lot of clarity on table.
Rule of 72 basically speaks how long it’ll take to double your money.
Here’s how it works:
72 ÷ rate of return = Years to double the money.
Let’s say you’re expected to earn 10% returns. At 10% CAGR, it’ll take 7.2 years to double your money. (72 ÷ 10% = 7.2 years).
Let’s say you’re expected to earn 7% returns. At 7% CAGR, it’ll take around 10 years to double your money. (72 ÷ 7% = 10.28 years).
Rule of 72 helps one do back of the mind calculations & look at the better picture.
Also, it helps one succinctly understand how compounding works while others scratch their minds.
For me, it has been a saviour after I understood how Rule of 72 works & I’ve become more peaceful & built more patience thanks to the big picture I can see every time I implement it.
The use case varies from making stock market earnings predictions to buying house & it’s price appreciation, population growth, etc, etc.
