Albert Einstein called compound interest the eighth wonder of the world. Earning interest on interest, year after year, can double your savings. Then double them again. And again.
Years it will take to double your savings = 72 / interest rate.
So if your savings are growing at 6% per annum, your money will double every 12 years. In an investment earning 10%, you’ll have twice as much after 7.2 years.
This is a rough rule to use for quick mental calculations, to give you an idea of how your money can grow. It becomes less accurate with rates above 10%. 72 is used because it can be divided by most common numbers. Using 70 would give similar results. This is referred to as the 7-10 rule.
The important principle is that while 7% might not seem like a huge return, earning this rate will effectively double your money every 10 years.
Note my use of the word “every.” You can double your initial savings, then double them again, and again, and maybe yet again.
The trick to compounding is to start early enough. No amount of extra saving later in life can compensate for lost compounding years.
($)
Stop living from salary to salary. Achieve Financial Independence. Retire Early. Join the FIRE movement igniting the world.
Follow these weekly posts for solid advice on how to escape the rat race, covering material contained in Hard Money.
No obligation, no pressure – ever.
This is no get-rich-quick scheme. It won’t be easy. That’s why it’s called Hard Money.
Work while they sleep. Learn while they party. Save while they spend. Then live like they dream.
If you have a book you’d like to publish, contact me to claim your 15 minutes of bestselling fame at No.1 on Amazon.
Anyone in Johannesburg who would like a signed copy (of any of my books) can have one delivered to their door by Big Bad Wolf Motorcycle Maniac Deliveries. No charge for delivery.
Also available at Inner Journeys in Edenvale.
No comments:
Post a Comment