More Rates! How rates can help you build wealth OR build more debt! Read on.
Photo credit from New York Public Library Author: Andrew Lee About 3 minutes read. You may hear of Rule 72 , or Compound interest, or other name like Time Value , Discounted Cash Flow or Future Value in various articles, websites, or forums. What do they really mean? Here, I hope a simple explanation could easily help you understand how "rate" could work for you or against you without a complex calculator or spreadsheet. In other word, you can simply process the numbers in your mind in seconds. We all know when you get a loan (e.g. mortgage, personal line credit, HELOC/home equity loan, etc.), there is an annual (could also be daily, monthly, etc.) interest rate. When you look at investments, usually there are a hypothetical rate of return the investor would expect. The effect of the rate is actually compounded in most cases. Another type is what so called " simple interest " which the interest is calculated based on the principle at the end of the term, but not...