The Secret, Magical Money Power



There is a mystical, magical power in the world of money. It's not talked about much, unless it's made boring and all the magic is squeezed out of it...so that even though you've likely heard of this powerful force, you may not have given it the attention it deserves.






This magical power is the power of COMPOUND INTEREST. See? Didn't your eyes just glaze over in disappointment? But wait! If you'll just keep reading, and give it a chance, this little principle literally holds the power to transform your financial life - all with only the tiniest bit of prompting from you. It's a low-maintenance, hard-working, pure gem of a concept, and FAR too many of us having it working against us instead of for us.

Have you ever heard of (or experienced) credit card debt becoming so unmanageable that most of the minimum monthly payments go directly to interest, and the principal takes 20 or 30 years to pay off? This is the power of compound interest working against the cardholder, and the banking institutions LOVE it! And why wouldn't they? They have loaned out money and are receiving re-payment of it over and over and over again for many years - at many times the cost of the original purchases on the buyer's end. A vacation, for instance, which seemed like a great deal and was put on credit card and not paid in full a month later, could end up costing two or even three times its original price in the long run. Maybe not such a great deal after all...

Let's look at that on a smaller scale. Let's say, for instance, you spend $1.00 per day on a coffee or pop. Would you like to know what that is costing you? Had you invested that $1.00 a day for just one year's worth of coffee/pop - or $65 - at a mere 5% interest, you would have almost $1,000 in 20 years. At first glance, that may seem a like a small amount, but notice that it's almost three times your original money spent - money that could have been in YOUR Pocket. Also, how many '$1' items are you trading your current and potential future earnings for?... (And that's just for one year...)



Now, imagine this principle working in your favor. With only a small amount of invested money, your cash will act like a magnet. The basic principle is this: With each bit of interest you earn on your original amount, you keep it in the account and allow that new total to earn interest, and so on. Each interest-earning period you receive interest on the ever-growing principal, and the savings enjoy a snowball effect - they just keep getting bigger and bigger!

TIP: HERE is a compound interest calculator you can play around with by inputting some of your regular 'treats' and see what they are REALLY costing you. Hint: They're costing you what you COULD have earned, had you saved and invested that money instead. Plus, remember, the more you save the more you earn, thus any extra money you can throw into the pool attracts that much more interest, by adding to the principal amount.

There are a few things you can do to put compound interest to work for you most effectively, including starting early in life, contributing as much as possible to the principal, and of course having as high an interest rate as you can find for your investments. Regardless, there is always a better option for your money than spending it or hiding it under a pillow. Whether you start with a lump sum or put small amounts away regularly, just do something! Let your money do the job it does best - let it work for you!

This seems like a simple concept, and it is perhaps because of this that it slips by most people. It either seems boring, or the power of it is not fully conveyed. Richard Templar, author of The Rules of Wealth, in which he shares the habits and behaviours of the wealthy as compared to the rest of society, has stated that in his observation, wealthy people 'get' (and use) the power of compound interest, and everyone else doesn't. Let it be said here once again: COMPOUND INTEREST WILL MAKE YOU WEALTHY. USE IT LIKE THE TOOL IT IS.

Here are some additional articles from reputable sources which may shed further light on this subject:

2 comments:

Angelo said...

hi! is there an email address where i might send info about having you as a featured blogger at peoplejam.com?
thank you,
angelo

High_Life said...

Hi, Angelo;

As you didn't leave an email yourself, I must leave my response here. :)

You can reach me at sma_enterprises@hotmail.com.

Happy Hallowe'en!

Shauna