I’m about to share with you the little secret of how the rich get richer and the poor stay poor.

And also a great way to wow your friends.

It’s called the “Rule of 72.”

I know, sounds boring.

But when you see its power it’s pretty cool.

Let’s say you’re 25. You have $20,000 saved.

You invest it and average 10% per year, the long term average of the stock market.

The “Rule of 72” says:

Divide 72 by your percentage return.

This tells you how many years it takes for your investment to double.

In this case, 72/10 = 7.2 years. Let’s round it off to 7.

So it takes 7 years to double your money.

So at 32 years old it grows to $40,000.

At 39, $80,000.

At 46, $160,000.

At 53, $320,000.

At 60, $640,000.

And at 67, $1,200,000.

You’re a millionaire.

Or you could have spent the $20,000 on a new BMW and said, “I’ll start saving later.”

If you started at 32 you’d have $640,000 at 67 rather than be a millionaire.

And the BMW long ago gone went to the scrap yard.


Second scenario, same starting point.

You want to be really safe.

So you put your $20,000 in the bank. Guaranteed. Insured.

Returning say 3%. Not bad.

The “Rule of 72” says your investment will double in value every 24 years. 72 divided by 3.

So now at 49 it’s worth $40,000. And at 73, $80,000.

So, though the rate of return was about a third, your total return was only a fraction.

That is the eighth wonder of the world. Compounding returns.

And the “Rule of 72”.

A cool little tool to calculate how rich you can grow.

The poor focus only on saving.

The rich focus on compounding.