How Understanding How To Apply The Dynamics Of The Rule Of 72 Can And Will Make You A Much Better Entrepreneur!
Are you open to understanding ‘how” the rule of 72, can and will make you a much more effective entrepreneur? Not just now, but going forward as well. If you’re not totally familiar with “the rule of 72.”
Here’s the gist of it; “The Rule of 72”, basically states take the number 72 and divide it by the current annual rate of return that your money is earning, in order to determine “how” many years it will take for the original amount of money you stated with to double.
For ex: let’s say you started with a nest egg of just $5,000 dollars and you placed your money in an extremely safe CD (certificate of deposit), and your money was earning annual rate of just 4%.
If you divide 72/4 you should get 18, meaning 18 years. Which means, in just 18 short years, your original $5,00 dollars will double and become $10,000!
Ah yes, the “magic” of compound interest! Now let’s say you were a little more aggressive (a little more of a risk taker) and you placed your initial $5,000 dollars (or X amount of money) into a mutual fund of some (translated), you’re heading into the up and down world of the stock market!
And your mutual averages just 9% interest. When you divide 72 by the 9% interest rate of return, you should get 8.
Meaning, your initial five thousand dollar investment has turned into $10 grand ( or doubled!) in just short 8 years! Hopefully, you can see what’s going on here! Theoretically speaking of course!
(By the way, these over simplified gross figures do not include any & all local, state and federal taxes, that you maybe legally liable for!)
How Understanding The Dynamics Of The Rule Of 72 Can And Will Make You A Much Better Entrepreneur!
Just for clarity purposes, because this post is not about trying to educate you on the wonders of “The Rule of 72.” Two quick points regarding this proven universal “money growing secret.”
First; once your money goes into the roller coaster ride (better known as) the stock market, your may (in the short term) earn 47% one year and the next, you incur losses of mins four!
But since over time (typically) every twenty year interval, your money typically earns (on average) at 12% in the Wall Street casino, (aka) the stock market!
Second; over any twenty year period, a nine percent return is extremely reasonable to expect!
That said; here’s the point. If you were to place that same initial nest egg of $5,000 dollars (or X) in your local bank, and your CD was only earning you a measly 1.5% annual interest. My friend if you divide 72/1.5, you should get 48!
meaning, it will take roughly 48 years of your life, in order for your money to double! Probably, a little less than half of your life for the typical female and three quarters for the average guy! Forget about it!
Here’s the tie in entrepreneur, if (for whatever reasons) you still haven’t quite connected the dots! Take the following four daily activities (masquerading) as productivity projects.
1.) Spending extremely valuable time checking personal email accounts everyday!
2.) Posting and reading Facebook tidbits 30- an hour and a half total per day!
3.) Mindlessly searching the web in general, one to two hours total per day!
4.) Constantly taking totally unnecessary personal phone calls, periodically throughout your entire most productive parts of your day!
You add all of these extremely deadly distracting, non productive time killers up, and that’s the equivalent of investing you non replaceable time in activities that ultimately produce about 1.5% worth of results!
In other words, you’ll spend a lifetime on them, with virtually little to show for it!
On the other hand! Take a look at the following five (far more) productive (potentially) long term money making activities!
1.) Consistently posting quality fresh “how to” problem solving content to your blog!
2.) Consistently (meaning) whatever your personal schedule permits, you guest blog post on other extremely relevant blogs in your niche!
3.) Create periodic informative (on or) off screen “how to” videos to post regularly to your youtube channel and other video sharing venues.
4.) And most importantly! Allocate time everyday (including weekends!) where you spend time studying (leveraging) the knowledge of the men & women that are consistently earning the type of income, you wish to earn!
Because those are your higher yielding activities! Don’t you agree? And just like the magic that happens when you consistently apply the basic principles of sound money investment concepts, and “The Rule of 72″, these higher earning activities, when help transform you into a much more productive and wealthier entrepreneur!
Any questions?
Please list at least two simple spin off concepts (in the comments section below) that you can apply to your business, product or service in the next 30 days or less!
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