Author Topic: Can someone explain the math behind the 173 mulitplier?  (Read 3574 times)

YAR

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Can someone explain the math behind the 173 mulitplier?
« on: February 20, 2013, 10:03:06 AM »
Subject says it all. I am just curious where the number comes from and how it relates to the 10 yr compounded ROI. It gets used a fair bit on the forums and in MMM's blog but I have not been able to find "the work" that produces that constant.

Thanks in advance,

YAR

jp

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #1 on: February 20, 2013, 10:08:43 AM »
I have no idea what you are talking about, I have never heard of "173 multiplier" and neither has Google. 

Are you maybe confusing the term?  Rule of 72?  That is a thing.

arebelspy

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #2 on: February 20, 2013, 10:12:42 AM »
YAR is referring to this:
http://www.mrmoneymustache.com/forum/ask-a-mustachian/need-formula-for-retirement-calc/

(Read "Possibility 1" in the third post.)
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arebelspy

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #3 on: February 20, 2013, 10:18:48 AM »
To answer the OP, I'm going to assume you understand Time Value of Money.

Then it's a simple thing of putting in 0 PV, 12 Payment (paying $1/mo for 12 mo./yr) for 10 years, FV of 173, and you see MMM used a rate of about 8%.

Thus $1 per month, for 10 years, at 8%, will turn into about $173.

If you need more explanation, let us know and I'm sure someone can help out, but hopefully that's enough to get you started.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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YAR

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #4 on: February 20, 2013, 10:42:18 AM »
To answer the OP, I'm going to assume you understand Time Value of Money.

Then it's a simple thing of putting in 0 PV, 12 Payment (paying $1/mo for 12 mo./yr) for 10 years, FV of 173, and you see MMM used a rate of about 8%.

Thus $1 per month, for 10 years, at 8%, will turn into about $173.

If you need more explanation, let us know and I'm sure someone can help out, but hopefully that's enough to get you started.

That is exactly what I was looking for Mr. Rebel, thank you.

Dynasty

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #5 on: February 20, 2013, 02:40:04 PM »
I think one would have to be living in dream land...

I'd be a multi-millionaire now..

jp

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #6 on: February 20, 2013, 03:06:29 PM »
I think one would have to be living in dream land...

I'd be a multi-millionaire now..

How's that?  What fantasy are you referring to?  The 8% or something else?

Dynasty

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #7 on: February 20, 2013, 04:08:02 PM »
Guaranteed 8% return.


Done by Forty

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #8 on: February 20, 2013, 04:24:02 PM »
Yes, a magical time and place, like the 80's...

Dynasty

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #9 on: February 20, 2013, 04:35:10 PM »
Everything occurs in cycles.

I'm pretty sure once we get out of this mess we are in, I'm going to be well positioned to reap the next long stock market cycle upswing.

Probably not until the 2020s though..

August West

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Re: Can someone explain the math behind the 173 mulitplier?
« Reply #10 on: February 20, 2013, 04:46:15 PM »
I haven't heard so much crying since I had kids in diapers.