How To Be A Millionaire: The Science of Compound Interest
If you save $10 a day:
- in 10 years, you will have $36,000
- in 20 years, you will have $90,000
If you save $10 a day, and invest it with 10% return:
- in 10 years, you will have $62,000
- in 20 years, you will have $600,000!
If you save $20 (not $10) a day, and invest it with 10% return:
- in 10 years, you will have $160,000
- in 20 years, you will have $2,000,000!
You would be surprised to know how many high income earners making over $100,000 are living pay check to pay check because they have no money management skills.
They only know how to spend: that's it.
There are 2 main factors that contribute to whether you will be rich or not.
It’s not how much money you make: it's not your job.
Especially not when 55% of your income goes in taxes.
And it's not by taking a mortgage at 10% interest either.
1. Trade off your instincts for rational thinking
In the history of mankind, money was not such a thing.
People used to take logical decisions based on their instinct.
People would seek pleasures: PLEASURES.
80% of people don’t even look at prices when they go out.
Most of us have no barrier check: we just want to enjoy.
We go for whatever gives us the «easiest / quickest» form of pleasure.
Money did not exist for over 99% of men’s existence - our instincts have not adapted.
The concepts of money management, compound interest, personal finance, budgeting and investing were inexistent.
We did not need money saving hacks, there was no retirement, no stocks or real estate to invest in.
Financial freedom were not even a concept: all we had is our instincts.
2. Warren Buffett started investing at 11 years old
Health matters most.
Love is second.
What comes third?
That expensive dinner?
Or the luxurious car you saw on Social Media?
Money.
Money comes third.
Apart from Health and Love, there is not much you can’t afford without money.
3. Understand the math behind Compounding
There is no easy trick without a mathematical formula, you don’t need to be a genius with a financial education to understand what is compounding.
Compounding is like a snowball effect for your money.
- You start with some money, say $100.
- You invest it, and it earns you more money over time, let's say $5.
- Instead of taking that $5 out, you leave it with your original $100.
- Now, your total is $105, and your next earnings are calculated based on this larger amount.
- This keeps happening, and your money keeps growing faster and faster.
- It makes your wealth grow exponentially.
If you save $10 a day:
- in 10 years, you will have $36,000
- in 20 years, you will have $90,000
If you save $10 a day, and invest it with 10% return:
- in 10 years, you will have $62,000
- in 20 years, you will have $600,000
If you save $20 a day, and invest it with 15% return:
- in 10 years, you will have $160,000
- in 20 years, you will have $2,000,000
Compound growth is like a money-making snowball that gets bigger as it rolls, thanks to the money it picks up along the way.
Warren Buffett was a kid hustling for pennies during the Depression, and at 11 years old in 1942, he launched his lifelong love of investing when he bought his first stock.
Three shares of an oil company called Cities Service at about $38 each. He sold his shares soon after at $40 each.
His first trade: he invested $114 and made $6. Today he manages $270,636,932,292: $270 Billions.
4. Conclusion
If you had saved and invested this money by age 11, just like Warren Buffett did, and knew about compound interest, how much money do you think you would have today?
Would you be a Millionaire by now?
Opportunities in the stock market are like sunrises; if you wait too long, you'll miss them. - Warren Buffett
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