How The Rule Of 72 Can Make Me Wealthy

How The Rule Of 72 Can Make Me Wealthy


Hey gang, Kris Krohn here. And today, I want to talk about the rule of 72. And how the rule of 72 can make you wealthy. And at the end of this video, I’m actually going to share with you my secret number that I look for on determining with this rule whether I will or will not do a particular investment. Bottom line, so much success comes down to math. And the rule of 72 is nothing more than what? It’s math. What the rule of 72 does is it gives you a shortcut to understand how long it will take for your investment to double. And so, for example, 72 is this magic figure that if you take 72 and divide it by whatever interest rate you’re going to be earning, it’ll actually end up telling you how long it’ll take to double your money. So, for example, just going to pull out my calculator here. Let me give you some examples. Let’s say that I was doing an investment and I was getting a 10% return. Well, with my calculator, if I take 72 and I divide it by 10%, it says, you can do the math. It’ll take 7.2 years and I’ll get my money back. Now, I want to ask you is 7.2 to double your money, is that a good idea? Because what it’s doing is this is a rule for compound interest. It’s not simple interest. Let’s just say that I’m earning 4%. 72 divided by 4 is 18. It’ll take 18 years for me to actually get that return. Is that good? Well, we live in a traditional financial world, friends where like, all the time it’s like, “Well my bank account gives me 1%, my annuity gives me 4%, this year my 401k did 11%.” Well, what that really means is that, it’s going to take sometimes 10, 15 or 20 plus years before you actually make your money back if it’s compounding. So, I want to share with you my magic rule that I use. The number I want you to write down is 15%. This is a minimum that I shoot for. If I take 72, the rule 72 and I divide it by 15%, it’s 4.8 years. This is less than 5 years. I look for investments that essentially have the ability to pay me back. Now, by the way, if you take a look at four 4.8 years, it basically means you’re doing over 20% a year on your money on average. But we plugged in a 15%. Why is it closer to 21? You do the math. That’s what compound interest does is every year it gives you an added benefit from the year before that it can keep rolling with it picks up momentum. I like 5 years. And so, my mind is programmed always around 15, 20, 25 percent. That doesn’t mean I don’t touch investments that will do less. But frankly, not very often. And only when I’m trying to keep my money safe. Right now, you need to understand that the excess money you have, if you don’t set aside a healthy portion of it to actually grow, you’ll never get where you want to get. So, the rule is 72 is my shortcut math for basically saying, “When am I going to double my money?” Now, 5 years to double your money, guess what happens if you try to double it again? It’s going to get shorter. And double it again, it’s going to get shorter. And double it again, it’s going to get shorter and shorter and shorter. So, over twenty or 30 years, you can make a lot of money. But only if you’re earning really good interest rates. This is my attraction to real estate investment. When I invest in real estate, what I really like about it is that it is a very plausible place for me to get 10% on my money, 15%, 20%. Sometimes 30%, sometimes more. And so, when I personally do real estate for my own deals, what am i shooting for? I’m always shooting for 20%. That’s basically doubling my money somewhere in between late 3 to 4 year mark. And if I’m doing that, that’s getting enough of a return that other investors want to give me their money and play with me, where we can do a lot more investing and now we pick up momentum. Others jumping in plus our money actually multiplying. So, when you use the rule of 72, I recommend that you actually have a sweet spot figure that you’re shooting for when it comes to your growth bucket. Of course, your security bucket can make a lot less. And you could also throw some Vegas money as some really high R-O-I. But a lot of that stuff never really pans out which means that you need a balanced approach that can sustainably work with time. And earning 4% here and 1% there and 15% here and 20% there. All of that stuff in the long term ends up taking care of you. So, those are my personal use… That’s that’s how I use the rule of 72 to actually work my system as I know it. I’m looking for R-O-I with 15% percent R-O-I or greater. And if I’ve got that, I’m doubling my money in less than 5 years and that’s aggressive enough to realistically get me where I want to go. Hey, thank you so much for watching today’s video. If you liked this video, then make sure that you subscribe right now. So, that we can share with you more videos as well as these other suggestions right here. And in addition my friends, I also want to let you know that if you want to know what kind of investments can yield you 15% or more, you need to go check out the link in the description below. Check out my website. You’ll actually find examples kriskrohn.com, for example. As well of different investments that I’m doing. And the deals that are making 15, 20 percent plus potential R-O-I. See you there.

14 Comments

  1. J.W Lov3Craft says:

    first

  2. Vlad Mercori says:

    Becoming wealthy is about upgrading your mindset, take action, be patient long-term and ninja short-term. Cool video!

  3. Sky Taylor says:

    Thanks for the videos brotha

  4. Adrien Adjei Sowah says:

    Where did the 72 come from

  5. Josny Bustamante says:

    How can I join your team? I'd like to partner up with you..

  6. Nickxx says:

    Hey! Can you do a video for teens? Thanks!

  7. Andrew DeWeerd says:

    This is logical for investments that are actually compounding in real time, but with real estate you are earning a simple return for a period of time until you reinvest the proceeds again, only at that point does it compound. Solid principal but it doesn't translate to a regular REI, only big shots like you 😉

  8. Luis Bautista says:

    what year plan should you buy a house? 30,20,15,10 or 5 years???

  9. Millennial Stoner says:

    Bitcoin – Long Term – Big Bankz

  10. Shyster92 says:

    Kris I’ve been watching all your videos and even ordered one of your books. The bank wants 20% down for an investment property. I don’t see you talk about this anywhere other than sandwhich lease.

  11. NICK20ty says:

    The most important thing is to put the Lord first in your life and then all things will fall into place. 🙂

  12. Carlos Sanchez says:

    Wow he godly

  13. Tim Y says:

    Where does that 72 come from?

  14. edward kenway says:

    What was this for??

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