72 = I x Y,
I is the interest rate, and
Y is the number of years needed to double your
Divide 72 years by your interest rate to estimate the
number of years it will take to double your investment.
For example, at a rate of 8%, an investments value will
double in 9 years.
Credit is based largely on trust. The average person
in the Navy is trustworthy and expects to receive a fair
deal in business and financial dealings. On the other
hand, the way people handle their finances is a reliable
sign of their general character and trustworthiness.
Usually, when you think of credit, you think of time
payment purchases or charge accounts. Actually credit
has a much broader scope.
The entire country runs on credit, including
industries; banks; and local, state, and federal
governments. In fact, if credit were to stop suddenly, the
result would be catastrophic. For example, almost no
one would be able to buy a home, an automobile,
furniture, or a television or stereo set. Without these
sales, unemployment would skyrocket. These salaries,
not available for the retail market, would in turn
adversely affect the sale of other goods. The effect
would continue from the highest to the lowest level, and
economic chaos would result.
Principles of Credit
Credit literally means buy now, pay later. The
system permits you to purchase goods as you need
them, but pay for them over a certain period. Credit
means you receive a loan of money, and you always pay
extra when you borrow money. Credit, if used wisely,
ensures a reasonable standard of living. However, you
cannot substitute credit for sound financial planning and
a systematic savings plan. Additionally, improper use of
credit can create a financial nightmare that can
adversely affect your job, family life, and mental and
Cost of Credit
Have you ever rented a motorcycle or sailboat? You
always know in advance that it will cost you so much an
hour or day. The rent or cost of using the bike or boat has
its base on length of use.
The rent paid for using borrowed money or credit is
known as interest. Sometimes, you may have difficulty
figuring interest. Some lenders and businesses quote
interest rates plus other charges in a way that hides the
actual figures. Then, people dont know the total cost of
loans or installment purchases.
When you borrow or buy something on time, keep
your eyes open for extra charges in addition to the
interest charge for the use of the money. Some of these
additional charges include credit life insurance, fees for
credit investigations, loan-handling fees, and health and
accident insurance. Often, the down payment and the
monthly payments are the only figures stated.
Ask for the total charges in writing, including early
repayment penalties and monthly rates. If you dont
receive the amount in writing, you can figure it your self.
First, find the total amount you will pay for the loan or
the purchase. Then subtract the actual price of the goods
from the total cost of the loan. The difference shows the
total cost of credit. Taking the time to get the facts pays
Most people find it to their advantage to build a
good credit rating. Some people object to buying
anything on credit and insist on paying for everything in
cash. They save until they have the cash to make a major
purchase, and they often do get better buys for cash.
However, a good credit rating is like money in the bank.
When you have a good credit rating, it means that you
pay your bills on time. Navy personnel usually have a
good credit reputation and should have no problem
getting a loan or credit when needed. A good credit
rating can be priceless in an emergency, such as a
medical crisis, fire, or death in the family.
You can establish a good credit rating by paying for
time purchases according to the purchase agreement.
Time purchases include items, such as furniture or cars
and items bought on credit card accounts. You can also