Compound Interest
and why it must work FOR you!
Financial peace of mind is PRICELESS and you must understand the POWER of Compound Interest
Compound Interest is a powerful and passive wealth generating machine!
Why must it work FOR you? Compound interest leads to compound wealth… think about it!!
Getting it working for you is the most important Abundance 
Wealth rule to apply (after Saving) and that’s why
Albert Einstein called it the 8th Wonder of the World!
Money touches every other area of your life and that’s why you must get this important principle working for you, if you want to achieve financial abundance!
You simply must get compounding working FOR you!
Sadly, this amazing concept is also one of the most misunderstood, ignored, neglected and confusing wealth concepts.
Let’s explore….what is compounding all about?
When it comes to your money, compounding is where you put aside a percentage of what you regularly make, that your SAVING. You invest it and in doing so, compounding can start working FOR you. It starts by SAVING a portion of what you make, that is, paying yourself first. Then you will invest into Assets that create a return/interest for you. Assets can be stocks, shares or an investment property, even a savings account, to get started and earning you interest every day. When your money starts to earn interest on the interest, that’s when compounding takes place. This is how you can earn passive income and also see growth in value, over time.
Compounding does need time to work. As that growth starts to work FOR you, you will earn more money overtime. Sound good?
Let’s make COMPOUNDING a regular Habit
With compounding there is an exponential principle that accelerates your wealth and shortens your time to freedom and greater peace of mind because your assets are working for you and creating your wealth.
Most people don’t understanding the power of compounding and allow it be work against them, in the form of consumer debt.
To SAVE or SPEND, it’s always your CHOICE
For example: You pay for something on your credit card or using your overdraft, or a loan and interest gets charged on the amount owed. First, there is the initial sum owed. Next, interest is added to that capital amount, and then that interest you are being charged, also gets interest charges on it. Very soon, the compounding effect has snowballed against you, increasing the amount that you owe, which will take you into debt overwhelm, fear, anxiety and stress. Not a pretty picture…
That is how compounding interest works AGAINST you, while it’s working FOR the lending institution or the bank where you owe the money. Your consumer debt is their asset, but it’s your liability.
That’s the principle of compounding, it will work FOR you in terms of helping you get to your freedom faster by growing your wealth, or it can take you to poverty and desperation when it’s working against you.
Your FOCUS, your CHOICE
You need to set compounding to work FOR you to create your financial freedom!
Your question from me:
If you were offered…
- One million dollars now, or
- One cent today and every day for a month, it will double each day. So tomorrow you will get two cents, day three you will get you four cents, eight cents on day four and so on for 30 days.
Which would you choose?
Would you want the one million dollars now, or would you want the one cent doubling every day? Most people tend to select the one million dollars today…
This is one of the biggest behavioural challenges people have on their wealth journey. People tend to have a bias towards perceived short-term gain plus they don’t understand the power of compounding.
If you understand compounding you would know that at the end of 30 days, if you had chosen the option of one cent doubling each day, you would end up with over four million dollars!
Now that’s the power of compounding!
Here are the four elements that you must include in your financial planning, to get compounding working for YOU!
1. Consistency
If you invest a lump sum into an investment vehicle and let it grow, compounding will work for you, but when you set up a regular investment payment, this will support the acceleration of compounding.
Compounding needs consistent contribution.
Most people start something, then before long they get bored or worried and start to tweak it and change their approach. With every adjustment or tweak, compounding gets set back. It can’t get the traction needed.for the power of compounding to do its magic.
I’m not saying you never adjust, but you need to give any strategy time to get settled and start working for you.
This goes hand in hand with the second element compounding needs.
2. Time
Compounding needs time to allow the strategy to start working for you! It needs time to allow your first investment to grow.
Time is a key element compounding needs to give you exponential growth. The more time you can give it, the greater return you will get over time.
3. Reinvest Investment Returns
So many people rob themselves and prevent compounding working by drawing off their investments too soon.
They consume the rental income from their property investments; they spend their dividends from their share investments, instead of letting this third element work for them.
Compounding needs you to reinvest those investment returns. You must allow the asset generated / investment income to be reinvested, so it can work for you and build the wealth snowball. Only when your investment has grown to a sustainable size do you start drawing from them.
4. Leave it Alone
This is the most important principle to allow compounding to work its magic in your life. Leave it alone, live your life and let compounding do its work FOR you!
Most people adjust or change their investments, make inconsistent contributions, rob their investment return too soon and don’t give their strategy time to work.
Questions for you to consider:
- In what ways are you using compounding to expand your financial freedom?
- Have you been allowing compounding to work against you?
- What can you do differently from today?
Please share in the comments below
Thanks as always for reading and sharing so generously and for choosing to master your money matters and live your juicy abundant life.
To your abundance with love
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