In the world of financial mathematics, there are many magic numbers that help wealth consultants and other finance professionalsâ€™ in estimating the timelines of various investments. In this blog we are going to explore the **RULE OF 72** and is simple applications.

__APPLICATION 1__: Time to double your money at a fixed rate of interest/return on investment

If you divide 72 by the rate of interest, you get to know the number of years it will take for you to double the money.

**Example:**

If the rate of interest is 9% p.a, simply ** divide 72 by 9%** and the answer is 8. Thus, it will take

**to double your money if you invest at 9% p.a. rate of interest.**

*8 years*__APPLICATION 2__: Rate of interest/return on investment to double your money in a fixed time

We will use application 1 in reverse to know the rate of interest needed to double your money to achieve your set goal.

* Example:*If you have INR 25000 today and you need INR 50000 in

**. Divide 72 by 5 years, the answer is**

*5 years***Thus, if you choose an investment vehicle that offers you 14.41% p.a. rate of interest/return, you will be able to double you money in 5 years.**

*14.41% p.a.*__APPLICATION 3__: Time taken by inflation to make your money half

Inflation is the erosion of the purchasing power of your money over a period of time. This Rule of 72 helps you to calculate the time needed for inflation to make the real value of money half.

* Example:*Assuming inflation today is

**7%**. If you divide

**72**by 7%, the answer is 10.28 years. This means, if you have INR 100000 in your bank account today, in

**10.28 years**for the value of the money to be halved to just INR 50000.

In the above 3 applications, we have understood the applications of the Rule of 72, one of the magic numbers of financial mathematics. *You can check the derivation of the Rule of 72 from this hyperlink.*

Alternatively, just knowing the Rule of 72 will alone is not a solution to all your financial management. It only gives you * estimations* based of numbers the answers to which will be same for everyone.

**To optimize your financial management, just like you have a family doctor, you must have a professional Wealth Consultant to personalize and customize financial solutions for all your life goals and building your net worth.**

**To book a complimentary meeting with a Wealth Consultant (Chartered Wealth Manager) go to WealthOK.in and book an appointment.**

Greg Cains December 10, 2020

I like the technique, its easy to practice!