Learn How to Double Your Money!

OK, let’s cut to the chase; everyone knows that the best way to make money on your money is to invest it, but we also all know that the stock market can yield a lot of different amounts of returns and that, whether professional or amateur, those future returns are never guaranteed.

With that in mind it’s best to invest money that you won’t need for at least a few years, if not for a few decades.

Simply put, when it comes to investing, time is definitely one of your best advocates. In fact, it’s pretty much the only way to guarantee that the money you invest will return high single digits or low double-digit returns. Also, when you think about it, if you are going to invest money you should consider investing it for at least 10 if not 20 or 30 years. The only reason to not do that is for the money you have an emergency fund and, even with that money, you can put it in a short-term investment that carries little or no penalties for early withdrawal (in case of emergency).

Another fact is that letting your money sit in a savings account is absolutely the worst choice to make, especially when most are delivering less than 1% interest while inflation is rising at about 2% per year. In other words, putting your money into a savings account is basically losing money because it won’t have the same buying power next year as it does right now.

Many people use the “rule of 72” to figure out how long will it take to double their money, and it’s actually a great rule and a great way to do it. Here’s how it works; take the annual rate of return that you expect and divide it by 72. That will give you a rough estimate of how long it will be before your initial investment is 100% higher.

A good example of this is that if you invest one dollar at 10%, it will take approximately 7.2 years for the one dollar to turn into two dollars. (72÷10 = 7 .2) the same math tell you that $10,000 will take just over seven years to turn into $20,000.

Take that same $10,000 and let it sit in a savings account with a 1% interest rate per year (which is quite generous actually) and it would take 72 years to turn into $20,000! If you have an extra 60 years to wait, this would be a great choice. If not, it definitely isn’t. (And yes, were being facetious.)

In the long run, 7% is about average for stock market returns, meaning that it might take slightly longer or slightly less than 10 years to double your money, but the Rule of 72 definitely shows that investing your money is much better than putting it into a savings account, and the best way to double it.

Net Worth Update: September 2013

The reason I track my net worth is to keep myself accountable. If you don’t track it, you’ll never find out if you are doing something right or wrong, if you need to stay the course or make corrections. Overall, I’ve been pretty happy with the results of my updates. There have been things to fix along the way, and I still have plenty of room for improvement.

September 2013 Net Worth

Not so much this month. I knew that this month was going to be bad because of the vacation, but we took a beating. For the third straight month, we lost ground, but this month we lost 9%! Basically, in 30 short days, we fell back to February in terms of our net worth.

The trip wound up being much more expensive than we anticipated, including paying $80 for parking for the wedding, plus a car repair. Having to fill the tank of my car every 4 days isn’t helping either. The first hour of my day at work is spent earning the money I burned to get there.

But there were some glaring mistakes on our part as well. To insure that we don’t have food spoil while we travel, we typically scale back our grocery buying prior to the trip. I guess this time we started too early and we ran out. And then, because we didn’t want to over-buy, we didn’t buy at all! Instead we ordered out for the better part of a week.

I also bought my brother a car. He broke up with his girlfriend and moved out and needed a way to get to work from his new place. I loaned him $400. He has promised to have it paid back by Christmas, which is around the time I plan on using it to pay off my last remaining credit card from college.

But all this means that my wife and I have sat down to talk about our spending habits of late and are cutting way back. Eating out is being virtually eliminated from our budget for the time being. I know Dave Ramsey says that if you are in debt, you shouldn’t see the inside of a restaurant unless you work inside of one. We are limiting ourselves to 2 visits per month, plus one movie (we saw the new Percy Jackson movie at the discount theater). We should have the Capital One card paid off around Thanksgiving.

On the upside, the retirement accounts did pretty well. We are up over $800. That’s an 8% gain over last month! My wife’s 401(k) did especially well because the employee stock in it (38%, down from 100% when we got married) has been doing gangbusters of late. They look like they are well on way to finally recover from the 2008 crash and have actually doubled in price over the last year.

Assets:

Cash $4014 Down $1688.
Retirement Savings $11,003 Down $808
Car: $0 Still junk.

TOTAL ASSETS: $15,017

Liabilities:

Credit Cards: $4934 Up $1896
Student Loans: $30,381 Down $129.
Outstanding Medical Bills: $6808 Down $348

TOTAL LIABILITIES: $42,126

NETWORTH: -$27,110

Net Worth Update: August 2013

Well, the year is just flying by. I can’t believe it’s Labor Day already. Just four more months to go before the end of the year. This month wasn’t so good. I’ve been waiting for the shoe to drop for a while now, and it finally happened. Retirement accounts took a hammering, and we had some large bills come in. Next month will be worse as we take our vacation and we finally take the car in for a somewhat overdue repair.

August 2013 Net Worth

While liabilities are down, assets took such a hit that the overall net worth is down by almost a grand. Yikes! But you have to take the bad with the good. After we get through next month, cash should start going up again up until Christmas time. Considering the geopolitical situation, I’m not too hopeful of stocks going up in the short term.

I don’t have a clue what is going on with my student loan. The larger one is going along just fine but the smaller one is having troubles. My student loans are the only payments that I automate. I automate them because I get a .25% interest rate reduction for doing so. But when I changed back accounts a few weeks ago, I had to make a manual payment for last month. This month, I am showing a balance due of $0, but also a payment of $0.

Assets:

Cash $5702 Down $1287.
Retirement Savings $10,195 Down $57
Car: $0 Still junk.

TOTAL ASSETS: $15,897

Liabilities:

Credit Cards: $3038 Down $100
Student Loans: $30,510 Down $116.
Outstanding Medical Bills: $7155 Down $282

TOTAL LIABILITIES: $40,704

NETWORTH: -$24,808

 

Net Worth Update: July 2013

It’s net worth time! Every month, I throw back the covers on my finances to show the world if I’ve improved or fell flat.

Jul 2013 Net Worth chart

I didn’t think July was ever going to end! Work was absolutely crazy; I worked 205 hours and spent another 50 commuting. But I seem to have weathered it okay. Despite a change in my accounting systems to reflect bills that I hadn’t previously treated as debt, I came out ahead.

A large part of this is because we have been stockpiling cash for our upcoming trip. We are using the credit card for everything, of course, for rewards,  protections, rental insurance, and to not have to walk around with a couple hundred dollars in our pockets. But we want to pay off the card once we return.

Meanwhile, the retirement accounts had a nice bump for a change. I finally broke $10k in retirement savings!

Assets:

Cash and checking account $6989 Up $1727.
Retirement Savings $10,251 Up $720
Car: $0 Still junk.

TOTAL ASSETS: $17,240

Liabilities:

Credit Cards: $3138 Down $100
Student Loans: $30,616 Down $153.
Outstanding Medical Bills: $7437 Not calculating the change due to accounting change

TOTAL LIABILITIES: $41,194

NETWORTH: -$23,951

How was your month?