How to Become Rich Part3: The Power of Compounding

Posted on October 25, 2016 By thesuccessmanual Topic: Personal Finance, Remarkable, Simpleguide

This guide belongs to 100 Ways To Be Being Remarkable Series, a special project that brings you business and self-development advice from The Success Manual.

If you think money has nothing to do with emotion, then try tearing up a one hundred dollar bill sometime.
- Anon

THE POWER OF COMPOUND INTEREST
Here are four rules that will help anyone who wants to know just what money will do:

At 4% compound interest, money will double itself in a little less than eighteen years.
At 5% compound interest, money will double itself in approximately fourteen years.
At 6% compound interest, money will double itself in approximately twelve years.
At 8% compound interest, money will double itself in about Nine years.

Suppose your first job at 22 years paid you $ 60,000 per year and over the course of your career rises that average 2% a year ( after adjusting for inflation) and you saved 10% of each year salary, even at the rate of 6% on investments, your net wealth would be $ 2.2 million at age 70. At a 10% compounded rate of return, it would be worth $ 7.8 million at age 70. At a 15%, $ 43.4 million. You would be rich by any standard.

HOW LONG WILL IT TAKE TO MAKE A MILLION IF YOU SAVE $20 DAILY?

1. 26 years: If you put $20 daily in a index fund. The stock market gives 10-11% returns on an annual basis. If you follow smart investors like Warren Buffet, the million pay day may be sooner than 26 years.

2. 43 years: If you invest daily in ‘safe’ treasury bonds that give 4.74% returns.

3. 135 years: If you save all that money in a shoe box.

Related Guides
Warren Buffet's Wealth rules
Peter Lynch's Rules for Investing
How to become Rich and Famous

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