Once you’re out of debt, you want to invest 15% or more of your income. (You’ll want to invest more than 15% if you’re behind.)
The cool news is your invested money will compound over time. The Rule of 72 demonstrates this concept.
For example, if you invest $1000 monthly for 20 years at a (modest) return rate of 8%, you’ll have over $500,000 in the bank.
The Rule of 72, the idea that your money will double every so often, is a fun calculation to do when running these numbers.
In order to determine how many years it will take for that to happen, you divide 72 by the average or fixed rate of return for that specific investment.
Example: You have a mutual fund that is averaging about 8% annual rate of return. You would then take 72/8 and determine that it will take 9 years for your money to double, as long as you don’t withdraw from that account.
