Although Einstein is best known for his theory of relativity, some declare that his discovery of the Rule of 72 is more important. Some skeptics however, declare that this rule had been known long before he was born. The majority nevertheless, believe that it was Einstein who popularized the rule.

So what is the Rule of 72 ? Why is it considered a basic rule that every-want-to-be-investor should know. The Rule of 72 allows you to determine when money would duple and how many years would it take to do it.

It is very simple to do the math using the Rule of 72. Just divide 72 by the interest rate and it will equal to the number of years it will take your money to double. But the uses of this rule is not only limited to investments. It can also be used to manage your debts intelligently. The following is how the Rule of 72 can be also written: 72 / interest rate = number of years for your debt to double

As you can see, the Rule of 72 can also be used to find out the number of years your debt will duple. Whether that debt is by credit card, loan or mortgage, the Rule of 72 can be used.

To illustrate my point, let’s use the interest of a credit card. Credit card companies here in the Philippines charge around 3.5% interest per month or about 42% interest per annum. Now divide 72 by the interest rate (42) and you will notice that your credit card debt multiplies by 2 every 21 months. (72 / 42 = 1.7 years or 20/4 months).

How will this knowledge aid you? Though the computation is not precisely correct because we have not considered that you are also paying off your credit card debt at the same time, however, this knowledge will give you a notion of how quickly credit card debt grows. The knowledge that your credit card debt is multiply twice every 21 month will more than convince you to pay up quickly.

To learn more about the Rule of 72 visit the blog of Zigfred Diaz where he talks about other topics including debt management.