It’s easy to feel overwhelmed and confused while listening to the huge figures being anted up to stimulate the economy, keep people in their homes, and save multiple industries – banking and automobiles for starters.

Here’s the critical bottom-line question “What are these government stimulus investments going to cost me and my family?” Actually, it’s quite simple to put big numbers in perspective – whether we are talking millions, billions, trillions, or gazillions – when you use Schmidt’s Rule of Nine.

Here is the rationale behind the rule. In 2007, there were 111 million households in the United States. Thus, each household’s share of, say, a hundred million dollars is about 90 cents. Ten million bucks costs you 9 cents, and your slice of a measly million is only nine-tenths of a penny.

Let’s apply up the logic to bigger numbers. A billion dollars (which is ten, hundred-million dollar chunks) costs you nine bucks; ten billion costs you ninety bucks, and each hundred billion dollar expenditures costs you $900. A trillion – now we’re talking real money! – amounts of $9,000 per family. Taking a real example, the recent economic stimulus package of $790 billion requires each household (or rather, that of our children and grandchildren) to repay $7,110 plus interest.

The next time you see or hear mega-numbers being bandied about, don’t let your eyes gloss over, simply use Schmidt’s Rule of Nine to wrap your mind around it. However you think about spending these a mega-amounts of money, considering the alternatives, it may be money well invested.

 

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This entry was posted on Friday, February 27th, 2009 @ 5:40 am on the category It’s Your Life—Make It Great, Uncategorized. You can follow any responses to this entry through the RSS 2.0 You can leave a response, or trackback from your own site.