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.