The Rule of 72: How to Double Your Money Like It Ain’t Even Funny!

Our society is really lacking in its financial literacy.  In other words, we’re failing in our financial education.  And the fact is, though our school system generally does not teach it to our kids, many parents don’t know enough to teach their kids either.  So, this is one area where we all have to become self-educated.  So, let’s get smart!

Today, we’re going to go over a fundamental financial principle that we all need to know.  The concept we’re about to show you may be the key difference in your financial life.

Have you ever wondered how you could double your money without doing anything? Well, I’m about to show you how.  But before this will actually work, you do need some money to start out with.  So for those of you are having trouble finding two nickels to rub together, the IW team will exclusively grant you $10,000 (which will magically disappear after you finish reading this article!).  And for those of you who already have $10,000 of real money…well, we’re not mad…we’ll still let you participate.

Seriously…

It’s called the Rule of 72

The Rule of 72 is the formula that will give you the amount of time it takes for your money to double.  In order for our money to double, it must provide a rate of return or return on investment.  This is also known as an interest rate.  So, here’s the formula:

72 DIVIDED by (Rate of Return) = # Years to Double Your Money

You divide the number 72 by the interest rate you receive on your money.  The answer is the number of years it takes to double your money.  For example, if you are getting an interest rate of 4%, you will divide 72 by 4, which equals 18.  This means it will take 18 years for your money to double if it gets 4% interest.

Are You Ready to Double Your Money??

Now pull out that $10,000 we gave you so we can double it!  I’m going to need you to blow the dust off of your math skills and work with me here.  Remember, divide the number 72 by the rate of return.

Question:

How long will it take your money to double with a 6% rate of return?…72 divided by 6 equals…..

12.  The answer is 12 years!

OK, now that you’ve got it down here’s a few examples of what your $10,000 could do…

6 % RATE OF RETURN

	$$$
NOW	$10,000
12 yrs	$20,000
24 yrs	$40,000

9 % RATE OF RETURN

	$$$
NOW	$10,000
8 yrs	$20,000
16 yrs	$40,000

12 % RATE OF RETURN

	$$$
NOW	$10,000
6 yrs	$20,000
12 yrs	$40,000

And you don’t need $10,000 to do this.  $100 will double too.  $50 also works.  Any amount of money will work!  You just need to focus on getting a favorable rate of return and giving your money time to grow.

Cha-Ching!!

It’s easy to get a rate of return of 1%.  The average checking account has an interest rate of less than 1%.  So, that’s not too challenging.  It is more challenging, however, to get higher rates of return such as 6, 9, or 12 percent.  And it is possible to get much higher rates of return than 12 percent.  By increasing our financial education we’ll find the opportunities to do so.

Now that you know how simple it is to double your money, work on increasing your financial intelligence so that can do it!

Get Caught Doing the Nasty!

I wish someone had taught me more about doing the nasty when I was a kid.  And I’m not saying that nobody ever mentioned anything to me about it, but I really wish someone would have really sat me down, explained it to me, and really drilled it into my head.  Now that I am an adult, I have become all too familiar with it and how important it is.  I’ve also learned how a lot of people don’t really want to do it.  But we’ve all got to do the nasty, don’t we?

The “nasty”…Are you serious??

Yep.  The nasty.  Too many people are afraid of doing the nasty.  However, it’s the only way for us to get what we want.  Here is how I define the nasty:

The nasty is everything between where you are and where you want to be.

It is the hard work, practice, and dedication.  It’s the blood, sweat, and tears.  It’s the coming in early and the leaving late.  When you are going after a goal you will have a number of obstacles, distractions, and challenges.  The bigger your goal, the more challenges you’ll have.  The smaller your goal, the less challenges.  But you will have challenges either way.

The Pile of…

A few years ago I was having a meeting with one of my mentors.  We were talking about goals and he was giving me some sage advice.  After speaking for a while he pulled out a pen, a sheet of paper, and started drawing.  His artistic talent blessed him with the ability to draw this:

“This pot of gold is your goal. When trying to get to the gold, you’re going to have a whole bunch of…poop to go through.  You have to stay focused so that this stuff doesn’t distract you.”

The point is, you have to go through the poop in order to reach your goal.  And I think going through poop is nasty.  Don’t you???

…Poop.  YUCK!!!

There’s no way around it.  We all have to go through the poop.  You have to practice when no one else is.  You have to work hard when everyone else is taking it easy.  And you’ll get aggravated.  You have to stay focused when everything else is out to distract you.  You’ve got to get your hands dirty.  And you’ll get frustrated.  But that’s just how poop is.

Often, people speak of how they wish to accomplish this or that but never seem to get around to actually doing anything.  One big reason for this is they don’t want to do the nasty.

For example, how many of you would like to have as much money as Bill Gates?  Most of us would answer yes.  But, if I asked how many of us would like to make the same sacrifices and apply the same level of focus that Bill Gates did to attain his financial status most of us would back down.

Here’s another example.  How many of you are satisfied with your current level of physical fitness?  Some of you likely are not.  (With approximately 2 billion people in the world who are overweight or obese, I would guess most of you are not).  You likely know what to do – proper diet and exercise.  What is stopping any of us from reaching our fitness goals?

It’s like the students who want A’s but don’t want to study.  Getting extra sleep, watching tv, and partying just keep getting in the way.  What is really stopping these students from getting an A?

The Nasty.  They just don’t want to do the nasty.

Successful People Do the Nasty

Find someone who has achieved any number of goals, especially exceptional goals, and listen to their story of how they became successful.  If they actually speak on their struggles, you’ll find they had to overcome all sorts of poop.

Michael Jordan was known for intensely practicing on his own even after the already demanding team practices.  It’s no accident that he became the greatest basketball player in the world.  Or how about you parents out there who put in the extra study time with your kids so they get the best education possible.  Ten years from now, it won’t be surprising if your child excels both academically and socially.  I was listening to one self-made millionaire describe his day while he focused on reaching his first million…body maintenance and building his business.  That was it.  Talk about doing the nasty!  That’s nasty…

Are You Doing the Nasty??

We all have to do the nasty.  It’s just part of life.  Great students do the nasty by staying up late, burning the midnight oil, studying for exams and writing research papers.  If you earn an income you are likely doing the nasty by waking up early, being a committed business partner, and working hard to meet deadlines.  We just have to remember to apply it to all of our goals and  make sure we choose the goals that truly motivate us.  Because you’re going to need a lot of motivation to make it through all of the poop.

sheet of paper, and started drawing.  His artistic talent blessed him with the ability to draw this:

How I Improved My Life by 85%

Quick question; how many of us would like to improve our lives?

Everyone.

To increase our quality of life there are things we need to eliminate or improve. I addressed this in the article Winners Quit. In that article, I gave a simple method on how to cease certain activities completely, be a winner, and just… quit. That was life improvement 101. The method I’m going to break down today is life improvement 202. With this method, I was able to improve my life by 85% and I will show you how to do the same thing. For example:

• Are you still spending money the way you “used to” without a real budget leaving you stuck with more month at the end of the money?
• Yesterday, did you still try to memorize your agenda and to-do list and end up forgetting everything you had to do?
• Fill in the blank. Is there some other money, time, or energy waster that needs to be solved?

I understand how it feels to do all of these things. They become sources of frustration, time-wasters, and create undone to-dos that do not improve our quality of life. They only add to the pile of things to get pissed off about. When this happened to me, I knew…

I had to find a way to solve the problem.

I had to find a solution. While in my office, I contemplated how to improve my life. My schedule was getting busy and I was working fool time. I could see Mr. Tee waving his finger at me all over again! I came up with 3 simple steps that helped me improve my quality of life by 85 percent. I will detail the math after I show you the method I used to achieve it.

And a word of caution; this exercise is not for the weary. It is for those of us that are serious about getting to the Promised Land of more time, more sanity, and more fun.

Step # 1 – Write down what you do

Make a list of everything you normally do. Grab a pen and a piece of paper, start listing them line by line. A week’s worth of activity should suffice for this evaluation but feel free to expand the time window if you need.

Detail is your friend here so the more information the better. If you travel to an office every day write down your times, activities, and means of travel. A weekly planner will help you in this exercise and will be a great reference in this step. You want to get a complete picture of what you do.

Step # 2 – Understand what you do

This is big! If you don’t have an understanding of your objectives you’ll have no clue as to why you’re eliminating, modifying, or keeping an activity. Confusion is antithetical to this activity. With each activity you need to know what the objective of that activity is.

Step # 3 – Categorize and Organize

You will use the following matrix to organize your activity. But before you do that, let’s first categorize your activity so you know to which quadrant it belongs.

Take a look at each activity you have listed. Line by line, look at each one and ask:

• Effective or ineffective?
• Efficient or inefficient?

Effectiveness is gauged by how well the activity helps you achieve your goals or objectives; efficiency is gauged by how much of your resources – time, money, energy – is required to get it done. For example, if you check your email one thousand times a day this may be an effective way for you to respond to a message but it is an inefficient use of your time. This would be categorized in quadrant 2 (effective – inefficient). Judge each activity using this same method.

Each of the four quadrants is explained as follows:

Quadrant 1 – Efficient and Effective: All of these activities are keepers and you don’t need to change anything about them. Just keep on doing them! Focus on these activities as much as possible.

Quadrant 2 – Inefficient and Effective: These are great because they are effective but their inefficiency means they waste resources – time, money, energy. That means you have the right focus, you just need to change your method. This category is where you will find the activities that need modification.

Quadrant 3 – Efficient and Ineffective: These look appealing because they are efficient. Unfortunately, they are ineffective in helping you achieve your goals and objectives. That means you don’t need to concern yourself with doing them anymore. Wave bye to these activities!

Quadrant 4 – Inefficient and Ineffective: This is your list of actions to eliminate. Somehow, someway, these need to be removed from your life… fast..

Now, take a look at your matrix with your categorized activities. Everything in the left quadrants (effective) can be kept as is or modified; everything in the right quadrants (ineffective) can be discarded.

Step # 4 – Improve

Next to each action that you have listed in quadrant 2 (effective – inefficient) write an idea for how you will get it into quadrant 1 (effective – efficient) and mark it with an asterisk. Each one of the asterisked ideas you wrote should make the activity efficient. Here’s an example from the matrix I made for myself:

Does it work?

Like a charm. I did this exercise a few months ago and implemented it immediately after completing it. I figured I would use myself as the lab rat to see if this experiment would be beneficial. I proved that it works now I’m sharing it with you! I couldn’t tell you how much time and frustration I saved by implementing it. Not to mention, my to-do list is actually getting done for a change.

How I got to 85 percent – the math

Here are the numerical results from my efforts. Here, you will see how I improved my life by 85 percent. I followed the exact same steps outlined above and here’s what I was able to accomplish in a short amount of time:

Here’s an explanation of the numbers you see:

• 67% of quadrant 2 activities have been modified and made efficient
• 100% of quadrant 3 activities are eliminated
• 86% of quadrant 4 activities were eliminated. There’s still one germ remaining.
• 11 out of my 13 regular activities have been eliminated or modified to become efficient and effective (quadrant 1). This is approximately 85%.

That’s amazing! That means I’ve improved nearly 85% of my daily activities over the last 90 days just by utilizing this method. Wouldn’t you agree that your life would be a little bit better if you eliminated or improved 85% of your regular activities? Let’s imagine that my results were extreme and instead of 85% you were able to improve your daily activities by 50% in the next 90 days, would you be upset about that?

Nope.

Action Steps – Welcome to the Matrix

Do exactly what you’ve just read. Create a matrix or list of your regular activities. List anything you want to analyze: relationships, employers, social activities, finances, deodorant, you name it.

You may come to a stumbling block on some activities and be unsure as to what category they belong. I understand how you feel because I ran into the same exact thing while I was working on my matrix. No worries, here’s a simple solution. I’ve found that a simple ‘yes’ or ‘no’ answer to the following questions suffices:

• If you are uncertain about an activity’s efficiency ask: can I satisfy this activity’s objective with fewer resources? If yes, inefficient; if no, efficient.
• If you are uncertain about an activity’s effectiveness ask: is this activity effective at accomplishing my objectives, goals, and aspirations? If yes, effective; if no, ineffective.

Take action and stick to it for the next 90 days. Can you report back in 90 days and let us know how you did? We’d love to hear about how your life improved by 85%.