Can’t buy me love
THIS article may relate more to a Beetles fan, than an investor, I would gather, but I will let you be the judge. The titled song from the Liverpool “chart topping” group, released in 1966, went on to entertain millions of fans. The message behind the song was basically that money and material possessions can’t be used to obtain love. So, the question is why do we even bother with the quest to be financially successful?
I believe the answer lies in the fact that while love cannot be bought by money, we need more than love to live in this world. We now move on to another question – how does one then balance between love and money? How about another reference to Beetles, this time their 1967 release of “All you need is love”. Does this answer the question? Perhaps, I should start broadening my music interest.
When do I stop “making” money (or stop working)? When I do retire, how much money is enough?
Consciously or not, we may have asked ourselves these questions. Many a time as well, our role and responsibility within the family institution has a large bearing on the outcome, especially in the later years. Meaning, income earners usually carry the role of fulfilling the financial needs of their family requirements, and in most instances (if not all), this just never ceases.
Nevertheless, for those in full employment, there is a cut off age that has been specified, 55 and in some instances, 60. Therefore, people in this category will have to plan not only to have family needs fulfilled but also to save up for the “golden years” ahead, by the time they retire.
If you had the option to go on working and earning, by whatever means, what would make you call it a day? The term “let money work for you, and not you work for money” comes into the picture here. While one may have been working for 20 or 30 years, rightfully at or towards the end, there should already be an investment plan in place, whereby the funds now starts working for the beneficiary via providing a return and capital appreciation. Here, the ends are met and maintained in some cases, with the means of attaining it having changed from the previous environment.
While it seems rather trivial, it is an interesting concept, and one which not many has thought about. For example, if buying a property enables one to house his family, why not buy another to provide you the returns. Having an alternate form of income, such as an investment income, or cashflow from outside savings, is key to ensuring that savings is maintained or at least become less dependent.
Knowing the Rule of 72 becomes handy if you need to do some fast calculation of cashflow estimation for investment purpose. This finance rule estimates an investment’s doubling time. While the scientific calculator is used by the financial planning community, dividing this number by the compounded rate of return per period will provide the investment’s doubling value for the simple “man on the street”.
For example, for an investment giving 6% interest rate return, the money will take 72/6 or 12 years to double; or to double your money in 10 years, get a interest rate of 72/10 or 7.2%. Other instances in which you can also calculate are as follows :-
● If university fees increase at 5% per annum, the current cost will double in 72/5 or 14.4 years.
● If inflation grows at 2% per annum, your money will halve in value in 36 years, and if it grows at 3% then it will halve within 24 years.
● If both inflation and price of beer increases by 3% and 10% annually, then the price of beer will double up in 72/(3+10) or 5.5 years.
Likewise, the rule can be used to estimate the simple investment returns while adjusting for inflation. A fixed deposit offering 5% annual interest rate, where the inflation is at 3%, will only cause the money to double up in 72/(5-3) or 36 years (calculated in effective purchasing power value), instead of 72/5 or 14.4 years.
For those aspiring “wannabe” millionaires, here is a calculator for you to estimate the savings you need to put a aside to achieve the goal. The Felix’s Corollary to the Rule 72 states that the future value of an annuity (periodic payment scheme) whose percentage interest rate and number of payments multiplied to equal 72, can be approximated by multiplying the sum of payments by 1.5x (or more accurately 1.39x).
An investment scheme that generates a 6% compounding interest, with a savings period of 12 years will total 6 x 12 = 72. If you intend to achieve a savings of RM1mil then you need to have total savings of RM720,000 (remainder of RM280,000 will be paid by interest earned). This divided by 12 years will give RM60,000 and further divided by 12 months will give RM5,000.
To summarise, in order to make RM1mil on a 6% compounding interest savings scheme, one has to save RM5,000 a month for a period of 12 years (at 7% interest the sum works out to be RM5,833 per month). The Future Value scientific calculator on per year basis calculates a figure of RM1.01mil.
● Raymond Roy Tiruchelvam discovered that one of the oldest known mathematical object is the Lebombo bone, discovered off Swaziland dated to about 35,000 BC, apparently used by women to keep track of menstrual cycles (so did women discover mathematics?)
I believe the answer lies in the fact that while love cannot be bought by money, we need more than love to live in this world. We now move on to another question – how does one then balance between love and money? How about another reference to Beetles, this time their 1967 release of “All you need is love”. Does this answer the question? Perhaps, I should start broadening my music interest.
When do I stop “making” money (or stop working)? When I do retire, how much money is enough?Nevertheless, for those in full employment, there is a cut off age that has been specified, 55 and in some instances, 60. Therefore, people in this category will have to plan not only to have family needs fulfilled but also to save up for the “golden years” ahead, by the time they retire.
If you had the option to go on working and earning, by whatever means, what would make you call it a day? The term “let money work for you, and not you work for money” comes into the picture here. While one may have been working for 20 or 30 years, rightfully at or towards the end, there should already be an investment plan in place, whereby the funds now starts working for the beneficiary via providing a return and capital appreciation. Here, the ends are met and maintained in some cases, with the means of attaining it having changed from the previous environment.
While it seems rather trivial, it is an interesting concept, and one which not many has thought about. For example, if buying a property enables one to house his family, why not buy another to provide you the returns. Having an alternate form of income, such as an investment income, or cashflow from outside savings, is key to ensuring that savings is maintained or at least become less dependent.
Knowing the Rule of 72 becomes handy if you need to do some fast calculation of cashflow estimation for investment purpose. This finance rule estimates an investment’s doubling time. While the scientific calculator is used by the financial planning community, dividing this number by the compounded rate of return per period will provide the investment’s doubling value for the simple “man on the street”.
For example, for an investment giving 6% interest rate return, the money will take 72/6 or 12 years to double; or to double your money in 10 years, get a interest rate of 72/10 or 7.2%. Other instances in which you can also calculate are as follows :-
● If university fees increase at 5% per annum, the current cost will double in 72/5 or 14.4 years.
● If inflation grows at 2% per annum, your money will halve in value in 36 years, and if it grows at 3% then it will halve within 24 years.
● If both inflation and price of beer increases by 3% and 10% annually, then the price of beer will double up in 72/(3+10) or 5.5 years.
Likewise, the rule can be used to estimate the simple investment returns while adjusting for inflation. A fixed deposit offering 5% annual interest rate, where the inflation is at 3%, will only cause the money to double up in 72/(5-3) or 36 years (calculated in effective purchasing power value), instead of 72/5 or 14.4 years.
For those aspiring “wannabe” millionaires, here is a calculator for you to estimate the savings you need to put a aside to achieve the goal. The Felix’s Corollary to the Rule 72 states that the future value of an annuity (periodic payment scheme) whose percentage interest rate and number of payments multiplied to equal 72, can be approximated by multiplying the sum of payments by 1.5x (or more accurately 1.39x).
An investment scheme that generates a 6% compounding interest, with a savings period of 12 years will total 6 x 12 = 72. If you intend to achieve a savings of RM1mil then you need to have total savings of RM720,000 (remainder of RM280,000 will be paid by interest earned). This divided by 12 years will give RM60,000 and further divided by 12 months will give RM5,000.
To summarise, in order to make RM1mil on a 6% compounding interest savings scheme, one has to save RM5,000 a month for a period of 12 years (at 7% interest the sum works out to be RM5,833 per month). The Future Value scientific calculator on per year basis calculates a figure of RM1.01mil.
● Raymond Roy Tiruchelvam discovered that one of the oldest known mathematical object is the Lebombo bone, discovered off Swaziland dated to about 35,000 BC, apparently used by women to keep track of menstrual cycles (so did women discover mathematics?)
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