Money and the Rule of 72

Saving money during our working years will help finance our existence when we are no longer working. Whether it will be a meager existence or a great one will depend on how much money we save today (unless we win the lottery or inherit a great fortune). How long will it take to double that money saved? What rate of return (interest) should we be looking for to double that money in say, 5, 10 or 15 years? Let’s find out by doing a handy and simple calculation using the Rule of 72:

Supposing you invest $1,000 today at 3 per cent interest per annum. Divide 72 by 3 and it will give you 24, the number of years it will take to double the $1,000 (ouch!). Another example: invest $10,000 at 8 per cent interest per annum today. Divide 72 by 8 and it will give you 9 years waiting time (better?).

Another side of the equation is: If you want to double your $1,000 in say, 3 years and you want to know the rate of return to achieve this goal, simply divide 72 by 3, and it will give you 24 per cent that you should be looking for. Another example: invest $5,000 and double it in 4 years. Divide 72 by 4 and you are looking at an 18 per cent rate of return.

The Rule of 72 gives a fairly accurate result assuming that the interest is compounded annually and the rate of return is constant. Even an additional 1 per cent yield goes a long way and would be worth negotiating with the bank, especially if you are a preferred customer. The Rule however may not give a not so accurate picture as the rate of return increases above 20 per cent, but let’s not sweat this stuff for now, as high yields of this magnitude are rare. If you find one, don’t just jump on it, be an informed investor first. Income from a successful business is of course another story.

Quote for today:

"Take care of the pence, and the pounds will take care of themselves."

- William Lowndes

To Biz or not To Biz

Want to go into business but haven’t got an idea what to sell? Well, a retired person can always sell his skills. One can teach his skills to willing learners or offer it as a consultant in an enterprise. Consultancy can be full-time or part-time. Decide how much time you want to work and communicate this to the business manager, and try to come up with an agreement that is workable for both sides. Also, check if you can work from home if that suits you and if it is feasible with the company.

A lot of businesses today are downsizing and offering separation packages to their employees in order to cut expenses. My previous employer is doing the latter although it is not strictly downsizing, as it is up to the employees to decide if they want to leave or not. I availed of this package four years ago, as I feel I’d like to have more time for myself.  Well, I'm doing one of the things I like now, writing.

If you prefer to go into real business and are looking for ideas, try The Business Fastlane. Perhaps a light bulb will turn on in your head after going through the many samples of business ideas conceived by other people from all walks of life and at different stages of their lives. Some have gone into their businesses by accident. Life is full of surprises, and it is never too late to start something you like to do. Who knows, you may find great fortune along the way.

Quote for today:

"When men reach their sixties and retire, they go to pieces. Women go right on cooking."

- Gail Sheehy, writer

Retiree's Itch

So you retired yesterday. You probably said to yourself when you woke up this morning, “At last, I’m free!” Free from waking up early, getting a quick shower, dressing up and dashing off to your car to beat the morning rush to your workplace. What a nice feeling indeed to be free from the daily grind! Then, the free days flew into weeks, and the weeks flew into months and now you’re beginning to feel useless and bored--from watching tv, tending the garden, playing golf or bridge with your neighbor, eating out at your favorite diner, and whatever it is you were eager to do before retiring. You begin to look for something more “meaningful” to validate your existence in this world.

Boredom and a feeling of uselessness are very common among people who retired. Some people do something concrete about it, some go about life wanting to do something about it but never get to it. What do “retired but not tired” people do? Well, they either think of pursuing interests like travel, painting, woodworking, etc.; participating in community or church service, or starting a small business. For some, it is time to clear up and organize the chaos in their attic or storage shed, and finally deciding to sell the unwanted/unneeded stuff in eBay--millions have done this and have made it their second vocation. Warning: it can be addicting especially when you see your positive feedbacks increasing. So you’re making a bit of money here and there--then, you say to yourself there is still hope for you to become a business operator if you would only try a bit harder.

I’m sure a lot of people have the secret desire to write about their life’s story. We all want others to know how we got the scar on our forehead, our first car, what we did with our first salary or how we managed to stay long in our marriage after all these years, would you believe it? Some would probably want to talk more about their dogs than their mates; some about their gadgets, or perhaps the places they visited last summer. Well, the time is now ripe to bring those stories into the open! Doesn’t matter if you don’t write professionally, just blog it anyway (to the uninitiated, blog is short for weblog, or a personal online journal). The internet has opened a lot of opportunities to people to become writers of different persuasions and intentions.

Quote for today:

"Retired is being twice tired, I have thought
First tired of working
then tired of not."

- Richard Armour, poet