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The power of compounding ~ Get Rich Slowly
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Financial Success: Start Early
Financial success is dependent on good habits practised over a long period of time.
You can still have a positive impact on your financial future if you're starting later in life, but you will then have a lot of work to do. This is due to the magic of compounding, that can help you create an impressive wealth snowball.
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The Power of Compounding
At first glance, compounding does not look remarkable. However, looking at compounding in action, you will notice a few things.
Consider, for example, investing in stocks at an average real return of 6.8%. (It is inflation-adjusted.) During the first few years, compounding doesn't really do much. After ten years, your initial investment would nearly double. After 16 years, your initial investment would triple, and in 20 years, it will quadruple. By year 40, you're earning more than your initial investment every year.
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The Importance Of Saving
Your investment returns are less important than your investment contributions. That is to say, how much you invest matters more than where you invest.
The more you contribute, the more there is to compound.
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Make Compounding Work For You
- Start early. The sooner you start, the more time compounding can work in your favour and the wealthier you can become. Next to starting early is starting now.
- Stay disciplined. Make regular contributions to your savings and retirement accounts. Try to increase your deposits with time. Your goal is to generate a large saving rate.
- Be patient. Don't touch your investments. Compounding only works if you let your money grow.
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