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Money Magazine recently ran a sidebar outlining some handy little financial rules of thumb. Here are my favorites:
The Rule of 72
This is a useful rule for figuring out how quickly your investments will grow… Simply divide the expected rate of return into 72 and you’ll get an estimate of the number of years required to double your money. Earning 9%? Your money will double in 8 years.
The Future Value of Money
If you’re debating about whether or not to make a purchase, keep this little tidbit in mind: Adding zero to the end of the price gives you a quick and dirty estimate of how much of your (potential) retirement nestegg you’re giving up when you make a purchase. That’s the amount of money you’d have in 30 years if you invested the money at an 8% return instead of spending it.
Grooving on a shiny new 160 GB iPod? That’ll set you back close to $3500 down the road. Doesn’t sound quite as enticing now, does it?
If you want to translate a salary into an hourly wage simply cut it in half and then divide by 1000. So if you make $50k/year, you’re earning roughly $25/hour. Conversely, you can get a rough estimate of your full time salary by doubling your hourly wage and adding three zeros to the end of it.
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