The Art of the DRIPs
What are the DRIPs you ask? Well, it is not the dripping of the faucet in the bathroom that keeps you up all night! DRIPs stands for dividend reinvestment plan. Which means that it is a plan that allows investors to reinvest their dividends into buying more shares of that particular company. This is usually done in fractional shares or additional shares.
DRIPs are an awesome way to increase the value of your investment. One of the cool things about this reinvestment plan is that it allows you the ability to buy more shares without paying an additional purchase price. With DRIPs, you don’t receive a dividend check tempting you to cash it out or use it to pay bills. Every penny in dividends is automatically reinvested for you to purchase additional shares of the company. These additional shares produce dividends, too. By allowing the dividends to be reinvested, you tap into the power of compounding growth without ever having to think about it. More on this in a moment.
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What is the ‘Rule Of 72’
The rule of 72 is a shortcut to estimate the number of years required to double your money at a given annual rate of return. The rule states that you divide the rate, expressed as a percentage, into 72:
Years required to double investment = 72 ÷ compound annual interest rate
Note that a compound annual return of 8% is plugged into this equation as 8, not 0.08, giving a result of 9 years.
Based on our conversation earlier about compounding and how it is your friend. We are going to discuss how the rule of 72 can help you.
Continue reading “The Comprehensive Guide to the Rule of 72”
Albert Einstein on compound interest
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.
Compound interest is the most powerful force in the universe.
Compound interest is the greatest mathematical discovery of all time”
So, Albert Einstein thinks this is the eighth wonder of the world, huh. Must be pretty amazing. We should dive into this and take a look.
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A simple word with a huge meaning. It is one of the hardest habits to establish in our financial life but arguably one of the most important. Because without savings we have nothing to utilize to help grow our money.
So how do we save money? I am sure you have heard this before but saving money is the most important thing you can do for your financial health. The first axiom of finance is to pay yourself first. Before you pay any bills and buy anything you must set aside money for your savings or investments. The rule is to save at least 10% of your take home pay every check. This may sound like a lot but it is an absolute must if you are going to establish any sort of saving plan with the goal to grow your money. Like anything you start small and grow towards your goal. I always say you can’t eat the whole pizza at once, as much as we would like to, but you need to eat it piece by piece. So if 10% is too much of a bite at first start at 5% and work your way up. You could do this gradually and as you increase it will feel less and less painful until you are at the 10%.
Continue reading “How Important is Savings?”
So how much do i need for retirement really? Part of the scariness or vagueness of that question is what makes people nervous about the actual answer. We are taught that retirement is a long ways off so who needs to really think about it and I will deal with it later.
One of the things that makes putting off retirement planning is that we don’t really know how much we are really going to need. The generally accepted number is:
One Million Dollars!
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Did you know that over one third of all Americans have no retirement savings at all! One of the goals here is to try to take the scariness out of retirement planning and what we can do to help you save more money and what to invest it in. Some more sobering stats for you:
Over 89% of all employers offer some type of 410k but only 75% contribute to their plans
But with this contribution rate would you be surprised to find that over 35% of people over 65 rely on social security alone.
Around 1 in 5 tap into their retirement plans for either a distribution or loan
Continue reading “America, We have a retirement savings problem!”