How To Magically Become A Millionaire In Only Seven Years
By and large, most people tend to be impatient. It's worse when they're in a state of desperation. As cognitive science proves, with anxiety comes a shrunken capacity for long-term thinking. If they don't snap out of it, they're likely to get stuck there. Without learning financial tools, their fate will be walking dogs for a living when they're eighty years old.
One way to prevent this unfortunate fate is to begin to understand the power of compounding. Compounding can be making something bad worse, like when bad consumer credit card debt is used against you. The good news is it can also intensify the positive aspects of something over time, which is definitely the side we want to be on.
If you have an asset, congratulations! You're one step closer to getting rich. Assets can include dividends, stocks, bonds, real estate, and anything that earns money for you. When your asset is a monetary investment that goes to work so you don't have to, you're probably earning compound interest.
Money is a terrible master, but it's the best slave. You want it to go make babies. How do you do that? By investing it so it can either earn capital gains or interest. These earnings can be reinvested to generate additional earnings over time.
We can expect this to happen in two ways. Your investment can generate earnings through simple interest or compound interest. Simple interest is money generated only on principal, the original sum of money borrowed in a loan or put into an investment , or the face value of a bond amount still owed on a loan. Compound interest is accumulated interest, or interest on the interest. That's where the magic happens.
If you invest $10,000 at 8% and put in $2,800 for fourty years. Voila! Thanks to compound interest you'll be a millionaire!
Don't want to wait forty years?
Let's say you have $10,000 earning you a 5% interest rate. As simple interest it will remain unchanged, earning you $500 in one year, which is great, because it's still $500 more than you had last year.
Now you have $10,500 which earns $525 on top of 5% earned from $10,500 which means your money babies just had money babies to the tune of $11,025 at year two.
After year 3 you have $11,577.
In 15 years, your initial $10,000 investment would give you $20,790.
So how can you become a millionaire with your initial investment of $10,000?
At 15 years, reinvest the $20,790 every year for another 15 years. That gives you $514,271.
Now, reinvest that $514,271 and at year 31 you will have $1,079,970.
What's the matter? Is thirty one years still too long to wait?
How's seven years?
Start with $10,000 at 5% and in reinvest the $10,500. That will give you $22,050 the next year. Then reinvest that and you'll have $46,305. Then $97,241. Take that amount and reinvest it, giving you $204,207. Then $428,835. Reinvest that and you'll have $900,554. Year seven, if you've consistently reinvested your returns, you'll have $1,891,164.
Seems easy, right? If you have an extra $10,000 sitting around, can get 5% return, and seven years to stay on top of it, it sure is! Only problem is, if you had that kind of luxury already you probably wouldn't be reading this in the first place. So start where you are. All you need are three straightforward inputs: the amount of money you invest, the rate of return, and however much time it takes for your money to make babies, so you can have enough to leave an inheritance to your offspring and won't have to be a slave to money for the rest of your life.
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