We just want to think about enjoying the positive things in life, not having to worry about money, and not having to worry about growing old and weak. But if we live from paycheque to paycheque at the moment, never seeming to be getting ahead or making some savings, how are we going to change things? In our search for financial stability, where do we start?
Following is a list of some of the wealth-building principles that will help you.
1. The Power of Compounding Interest/Growth
Compounding works by any interest earned to the initial period the next lot of interest is calculated on the sum of the two, and so on. Interest is earned on interest. This gives the effect of exponentially increasing the value of an investment.
One of the best ways to calculate how compounding interest works with different rates of return is to become familiar with the Rule of 72. This rule states that “The number of years that it will take for your money to double is 72 divided by the interest (growth) rate”.
Therefore if you have $1,000.00 invested at 10% interest, then the sub-goals years that it will take for your money to double to $2000.00 is 7.2.
72 divided by 10 = 7.2