Law Students

Financial Rules of Thumb

By Athar Khan

I came across some cool math formulas to answer some common questions. Thought I would post them on here:

1) How many years will it take to double my money?

Divide the number 72 with your estimated annual rate of return. E.g. if you’re making 7.2% each year, it will take 10 years to double your money. At 12%, it will take only 6 years.

2) For every dollar spent today, what do I lose in retirement savings?

As a rule of thumb, multiply it by 10. The rule is based on an 8% rate of return over 30 years.

3) What do I need to earn in pre-tax money to buy what I want?

Multiply the cost by 1.4. The rule is based on a 28% tax rate.

4) What is my an hour of my time worth?

Divide your annual income by 2000. Or, you could take half your annual income and drop the last three zeros. This rule assumes a 40 hour work week with two weeks of vacations per year.

Full post as published by Atharkhan on March 09, 2008 (boomark / email).