Richer by the Day
Ongoing ramblings about personal finance, and all related topics. If it has to do with money, it will be covered here.

Filed under Calculations, Rules of Thumb

The Rule of 72 is well known: Divide 72 by a rate of return to get the number of years for your money to double. Example: at 4.5% return it will take 72/4.5= 16 years to double your money

Here are a few more quick calculations:

Cost Before Taxes
Multiply an item’s cost by 1.4 to figure out what you need to earn before taxes to afford it
Example: A $250 Nintendo Wii will require 250*1.4= $350 in pre-tax earnings

Hourly Rate to Yearly Salary
Double your hourly rate and add three zeros to get approximate yearly salary
Example: at $20/hour, you make about 20*2 = 40 –> $40,000 per year

Yearly Salary to Hourly Rate
Opposite of above: Remove three zeros from your yearly salary and cut in half to get an approximate hourly rate
Example: at $60,000 per year you make about 60,000 –> 60/2 = $30/hour

Current Spending Versus Nest Egg Worth
Add a zero to the cost
Example: Using $2,000 for a new computer today would have been worth 2,000 –> $20,000 in a retirement account 30 years from now.

Calculations assume a 40 hour work week, 8% investment return, and 28% tax bracket.


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