ONE OF THE WONDERS OF THE WORLD
One of the most powerful concepts of wealth creation, is leveraging the power of compounding interest!
It was Albert Einstein that said… “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
When you begin to grasp this idea, you will soon realise that this is one of the modern wonders of the world!
I was recently listening to an audio from Tony Robbins, and he used a game of golf as an example.
Now just say you were playing a game of golf and you decided to bet 10 cents a hole.
Then every hole after, you decide to double that bet!
Below I will show you how this works.
- Hole 1… 10 cents
- Hole 2… 20 cents
- Hole 3… 40 cents
- Hole 4… 80 cents
You get the idea!! But is this really going to add up to much?
Lets’s jump to hole 9.
9. Hole 9… $25.60
10. Hole 10 $51.20
Okay, it is starting to add up, but how much could it be? A couple a hundred??
11. Hole 11… $102.20
12. Hole 12… $204.80
Now let’s jump ahead to hole 15!
15. Hole 15… $1,638.40
16. Hole 16… $3,276.80
Scared yet?
18. Hole 18… $13,107.20!!! And we started at 10 cents a hole!!!
USE THIS WITH YOUR INVESTING
AMAZING!
As you can see, using the power of compound interest is truly an amazing concept!
It starts off slowly, and then it gets to a point when it just explodes off the chart!!
So the key to this idea is to start saving TODAY!
Start early and do it often!
PAY YOURSELF FIRST
To allow the Power of compounding interest to work it’s magic, you must use the number one fundamental rule of investing, and live by the motto of spending less than you earn, and investing the difference!
The key to success with this is to always PAY YOUR SELF FIRST!!
Open up a separate online savings account, and every month or fortnight or whenever you get paid, transfer 10% of your pay into this account.
This account will be your FFA account or your Financial Freedom Account.
This money will be used for investing only.
Investing in things such as Shares, Real estate, Business’s, traditional or online, and to create passive income streams!
In this account the principle amount you put in will NEVER be spent!
It is the goose that will lay the golden eggs that will lead you to Financial Freedom!!
Don’t worry if you can’t put 10% of your wage into this account at first, just pay yourself first and make it a habit!
Then build up to your ideal percentage!
IN SUMMARY
So in summary, start putting the power of compounding interest to work for you, open up your FFA account and PAY YOURSELF FIRST!
Start slow, and in time this powerful concept will begin to work it’s magic, and you will be on your OWN road to financial freedom!
If you have any questions or comments feel free to leave them below.
To your success,
John W. Newman
Dream It… Believe It… Then Achieve It!
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Hey John,
This is brilliant information for whatever age level. The sooner that you can use the power of compounding interest to your advantage, the better.
I remember when I was in my mid 20’s, I listened to a bank presentation about if you had started a IRA type of account when you were 18 compared to 25 years old, that the difference in total earnings is twice as much just by starting 7 years earlier. So instead of having 2 million in the bank at 65, you now have 4.
The power of compounding interest, it can make you or break you. Make you if you’re making it and destroy you if you’re living under compounding credit card debt.
Yes it is truly remarkable how much compound interest can add up to over 20,30,40 years!
Unfortunately most people believe that there is always “time” later on, unfortunately time runs out awfully fast, so the only “time is NOW!”
Thanks for your feedback as always Todd 🙂
The power of compound interest is widely used in the investing world, a great investor, Warren Buffett shares his philosophy on this as well. This philosophy can be used in anyway related to your life. It is also called the ripple effect. Whatever you do in your life will pave your future. Start doing something about your life now or regret it later.
Great post John, you really set me thinking.
Cheers!
~Jack (BareNakedScam)
Thanks for your feedback and insights Jack!
Every action will start a ripple and cause a reaction – either positive or negative.
Start something NOW!
Invest NOW!
Thanks again.
Like the others i like the golf analogy, it makes sense to me. It makes the process seem easily achievable. It put into perspective how a little percentage can go a long way. Thank you for taking the time.
Thanks for your feedback John!!
It is really amazing how compounding can add up over time!
The secret is to start investing now and keep going, it is never too late!!
That is a very nice post. It is quite nice how you also used golf as an example, and gives us a taste about investment and the power of compounding. Keep up the good work!
Thanks very much Michelle!!
I like the page you’ve written. It’s short and to the point. I liked the example you used to make your point. We don’t think of what 10 cents amounts to when it is compounded 18 times. Anyway good job.
Thanks for your feedback Darrell!!!
It is amazing how it can add up like that!! The POWER of compounding!!
Hi, John
There’s some very interesting points you’ve made here. I’m a great fan of Tony Robbins and I like the way you’ve used golf as an example for investing money. The trouble with most people, they spend more than they earn and end up in debt which is very hard to get out of.
This is why many people see the Wealthy Affiliate community as the solution to their financial problems. Wealthy Affiliate teaches people how to become financially free through building an online business and they soon get to the point where they are able to bet on the golf game you explained about 😉
Neil
Thanks Neil!!
The big guy is awesome!!!