As you can see at the beginning, at the first blog "EVERYBODY GET RICH, THE POWER OF COMPOUNDING" Tony Robin talks about how a guy who has been working for UPS $14/hr retired with $71 million. How does it possible to make that kind of money with a regular job. This is not a high pay job. Is it even possible to make that kind of money? Let's analyze the detail to understand how money (compounding) works.
Making $14/hr X 8hrs (a day) X 10 days X 26 checks throughout a year = $29,120. This is how much he makes annually. This is before tax, it would be taxed of course and ended up having around $20,000. He still has to pay rent (or mortgage), food, insurances and all sorts of living expenses. The question is how much left over does he have, with the money how could he make 71 million dollars?
Here is the simple calculation you can do with a compounding calculator online or app on your smartphone. Let's set up compounding interest rate 12% and work it out. 12% is the average of S&P 500 recorded by the second oldest investment corporation, American Funds since 1934.
This is the simple illustration. Let's say he starts investing at 20 until 76, start it off with $10,000 and contributing $800 monthly. The result is astonishing!!
Basically what you can see is what you can get. This is not a magic. This is a simple investment. The power of compounding has been proven and making any investors who follow the rule rich in history. Here is the result!!
Over 56 years in his investment. He gets to walk away with $72.157.797.32 for his retirement regardless tax and investment fees and all that. I know it is unbelievable. That's why some people don't believe in investment, some people believe only in cash. My opinion, ignorance is not blessed because compounding interests always work and you can expect to get a return for what you contributed and time you dedicated. Now, I want you to consider two things when you invest your money.
- Time
- Contribution regularly (even $50).
It comes to time, one of reason people cannot have money later on is lacking knowledge. People don't want to invest their money, especially when they are younger. They don't understand how investment works, that's why they don't believe in it. Once they start learning how money works, how rich people get richer and richer and then they would finally realize how powerful it is to invest their money. This is not a secret, it is a knowledge. For younger people, they may take 10 or 20 years to start understanding the rule of investment. Some people never. At this point, once they did, later on, they already lost a significant amount of time. Some people don't see 6 years as a long period, although in investment it is. With 12% interest rate, basically your money get double every 6 years. Please take a look at the illustration. When you start investing in the beginning of 6 years, you don't see much of growth, however, when you look at the end of the compounding illustration, it takes 6 years for your money to grow from $35 million to become $ 72 million. Isn't it powerful?
Secondly, people don't really like paying for something they cannot actually see. They buy groceries, car, and TV and all that. However, they don't jump into investment lightly. People get scared away instead. I know there is more or less some risk involved. That's why I want you to talk to a financial adviser to choose a right investment vehicle to maximize your profit. The most important thing to remember even if you don't have much money is a regular contribution. People think that investment takes $10,000 or $100,000 to make money. It is not true. Contributing from $50 or $100 monthly can take you to a comfortable retirement. Of course, if you had a lump sum cash to start with, your money gets to grow faster but what important for you to know is that contributing a little be of money regularly can make a significant difference in your future. For instance, in Japan, people don't really know how investment works, so once they become 21, they would be forced to pay $153 monthly to invest their by the order of the government, It is a law. Without knowledge, people cannot make a right decision either do nothing or procrastinate. That's why I want you to remember that you are free to make any choices, but you are not free to escape from the consequences. Be wise and start investing for your financial freedom.
<Recommend Book>
The Only Guide to a Winning Investment Strategy You'll Ever Need: The Way Smart Money Invests Today
