subject: Value Each Dollar to Create Wealth! [print this page] Picture this: You are reading a business journal when you come across an interview of an individual who has really made it big in life. You read the interview and are amazed at the individuals possessionsbig house, fast cars, and luxury cruise ships.
However, the individual also tells the interviewer that making it big didn't come without its troubles, and that every dime had to be saved and invested carefully. Obviously, this individual was good at managing finances.
You too can create wealth by taking a leaf out of this individual's life, and the most important lesson in this case is: value each dollar. You need to take care of each dollar you earn and invest carefully. One can liken a dollar to a seedplant it and nurture it carefully, and it will grow into a big tree eventually.
Let us consider a few examples below to understand how a few dollars can eventually amount to a million:
You invest $1 per month in a bank account that gives you 3% interest on your investment. With this rate of interest, your $1 will become $1,000,000 in 468 years. That's 4 times the human lifespan, and so, it definitely is not practical.
Now, if you invest $30 per month instead, you can earn $1,000,000 in 147 years at the same rate. That's much quicker, but still is not fruitful.
However, if the interest rate is 10% instead, $30 a month can earn you $1,000,000 in 56 years. Hence, you can realistically earn $1,000,000 in your lifetime.
There are some more amazing but believable statistical figures that show how small but correct steps, if taken early, can indeed make you wealthy. If your parents invested $30 per month from the day you were born at a 15% interest rate, you will receive $50,000,000 by the time you are 65! The same investment at 20% will earn you a thousand million dollars when you retire at 65.
That'sthe power of a single dollar!
Though the above steps may seem simpler to you now, the cynic in you may still ask "Is it really that simple? And how would I expect to earn at a rate of 15% to 20% consistently?"
The answer is: compound interest. Compound interest increases your money even when you are not actively contributing to its growth. This type of interest has the power to grow your investment exponentially. Rates of 15% to 20% are indeed possible if you invest wisely.
Let us understand the power of compound interest with the following examples:
Invest $200 per month at 20%, and in 20 years, it will grow to $632,000. Therefore, you invest $480,000 and get an additional return of $152,000- that's not too bad.
Now, if you delayed the investment for a year and invested the same amount at the same rate and duration, the last year would cost you $116,000, and that's a pretty big amount.
So while compound interest is an amazing tool, procrastination hasis would make you lose out on a lot of money.Einstein himself said "the most powerful invention of man is compound interest".
The lesson here is to invest now! procrastination is a very expensive process.
Thepoint of this article is to illustrate that you do not need to be a financial wizard to become wealthy. Financial investment is not rocket science; it is about respecting each dollar you earn,investing early and wisely. Keep things simple, choose the investment options carefully, and choose to create wealth now.
