Start young guarantees you win the compounding interest
lottery.
Are you counting on winning the lottery to secure your
financial future? According to Farm Credit of Western New
York, 16% of Americans are. Unfortunately, for those 16
percent, you would have better odds playing the tables in
Vegas or getting struck by lightning.
Sure most of us know counting on winning the lottery for
retirement is a big gamble. But for young adults if you're
expecting social security or pension plans to secure your
retirement that is just as risky. Chances are ' for those
of you under 35 - you won't receive much from any of these.
Don't be scared, there is an easy way to make sure you can
afford to retire young without a lot of effort on your part.
What if I told you for only $73 dollars a month you have a
good chance at enjoying a $1,000,000! No not the lottery '
by investing $73 a month starting at age 18 you or your
child could reach the million dollar mark without a lot of
effort. You can live worry free and relax knowing that you
are financially secure well before you reach retirement age.
Young investors have a huge advantage and by following a
simple and consistent plan you will have what 16 percent of
people are desperately hoping for everyday. A lottery
jackpot that is guarenteed! Fix the game, retire young and
secure your own big winner by using a powerful financial
force.
This powerful money principle, that will almost guarantee
every young person generates their own lottery winnings, is
'compounding interest'. Compounding interest has a
snowball effect on your money and the earlier you start a
consistent investment plan the easier achieving financial
freedom will be.
Compounding interest? If you have you ever experienced debt
you've seen compounding interest work against you. You pay
your bill every month but your credit card bills keep
getting bigger and bigger. That's compounding interest
working against you. If you have experienced this then you
have felt how powerful the effects of compounding interest
can be. Avoid the debt traps that have plagued so many of
us and get compounding interest to work your favor.
The definition of compounding interest is: income from
interest that is earned by the amount you invested plus the
interest already earned from prior periods. To break it
down, your investment is paying you money on the principle
amount you invested plus the return you that you have
already earned. Basically you are generating money from
your hard earned cash that you personally invested and what
that original investment has already paid you.
By getting compounding interest working in your favor you
are able to make money off money you already made. This
creates a snowball affect on your money where it is able to
grow larger and larger over time. The earlier you start,
the more time your investments are able to benefit from the
effects of compounding interest.
Just by reinvesting money that you're investments returned,
the money you earned in interest last year is making you
money. After 15 years you have 15 years of interest
earnings making you money.
Jump online and check out free compounding interest
calculators to see for yourself. You'll be motivated to
start a saving and investing plan once you see for yourself
just how powerful compounding interest is.
Calculating compounding interest. Take a few moments and
play with a compounding interest calculator. Seeing the
effects of compounding interest first hand is a powerful
motivator. You can access a compounding interest
calculator by visiting www.FreeBy30.com/investing.html.
What's more, you can calculate it manually by using a hand
held calculator. In order to do so just enter the initial
amount that you are planning on investing or already have
invested. Then multiply that by the rate of return you are
estimating.
To illustrate, if you had $2,000 invested and thought you
would get a 12% return then you would multiply $2,000 x
1.12 = $2,240. The second year you would use $2,240 x 1.12
= $2,509. After 10 years that would be up to $6,212,
$19,293 after 20 years and $59,920 in 30 years. That's
$59,920 from a $2,000 original investment ' that's an
example of the power of compounding interest!
Compounding interest goals. This section will give you
investment goals that you can attain using the power of
compounding interest. The examples presuppose that an
investor is starting with $0 and using an annual return of
12%.
Investing $100 per month and you may reach the million
dollar mark in 38 years. Investing $200 per month and you
may reach the million dollar mark in 32 years. Investing
$400 per month and you may reach the million dollar mark in
27 years. Investing $700 per month and you may reach the
million dollar mark in 22 years. Investing $1,200 per month
and you may reach the million dollar mark in 17 years.
How leverage can boost the effects of compounding interest.
Using leverage will supercharge the effects of compounding
interest. Using real estate investments is one way to
benefit from leverage.
With investments in the stock market for example, you are
earning interest based on the amount you invest. When you
purchase real estate your returns are based on the value of
the asset you control. To illustrate, if you had $20,000
invested in the stock market and your stocks appreciated
10% you would make $2000 the first year. Not bad.
Now with real estate you could purchase a home with a 10%
down payment. That would allow you to buy a $200,000
property with the same $20,000. Your return would be
calculated off the value of the property - $200,000 in this
case. So the value of your property after the first year
would be $220,000 ($200,000 x 1.1).
If the property continues to appreciate at 10% annually,
the value of the property would be $242,000 the second year
and $518,748 after 10 years. The power of compounding
interest works faster when you have the ability to leverage
your investments. Investing in real estate may allow you
to amplify the power of compounding interest.
Compounding interest - your advantage. Using the power of
compounding interest - whether in the stock market or real
estate investments ' will give you a many financial
benefits. It is important to note that the sooner you are
able to start saving and investing money the greater
financial benefits you will experience.
So the next time you're thinking about dropping ten bucks
on the lottery ' think again. Go for the sure lottery
jackpot by investing that in your future.
----------------------------------------------------
Vince Shorb, creator of 'Financially Free by 30' home study
course and the leading young adult financial literacy
expert, prepares young adults for the financial real world.
Get your free copy of his latest book and instructional
videos at http://www.FreeBy30.com .
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