They say Albert Einstein called it “the most powerful force in the universe” and that it was demonstrated by the eighth wonder of the world. Compound interest isn't magic, but if you understand it and use it well, it can transform your finances.
What is compound interest?
Simply put, it's when the money you earn from your investment also starts earning money. It's money working for you... and then, the money from that money works for you too!
Simple example:
If you invest $1,000 at 10% per year, at the end of the first year you'll have $1,100.
In the second year, I don't want 10% on $1,000, but on $1,100. And so on.
After 10 years, at that same rate, you'll have over $2,500 without investing a single extra cent.
How can I take advantage of it?
1. Start early. The sooner you start, the more time compound interest has to do its work.
2. Be consistent. Invest a fixed amount each month. It doesn't matter how little it is; the key is consistency.
3. Reinvest your earnings. Don't withdraw money if you don't need it. Let it continue to grow.
4. Patience. Compound interest takes time. At first, it grows, but then... it accelerates like a rocket!
Einstein understood this, Warren Buffett practices it, and you can take advantage of it today.
You don't need to be rich to get started, but if you start... you can go much further than you imagine.
Are you already using compound interest to your advantage?
Leave me your questions or comments. And if you liked this information, share it with someone who also wants to improve their finances.
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