Ideas to Make More Money and Build Your Wealth: Applying the Power of Compounding Interest

By | July 26, 08

Ideas to Make More Money and Build Your Wealth: Applying the Power of Compounding Interest

Do you really want to retire a millionaire, having enough money to take care of your needs, or to maintain your present life style even when you are no longer making money?

If you do, then one idea to take very seriously that can guaranty you that life is: save 10% of your income and invest it, then reinvest the proceeds continually during your working years.

The money-making, wealth-building power of this simple financial plan is known as compounding interest.

Here is a parable that will show you just how powerful compounding your money can be, such that if you would adhere to it, would certainly make you wealthy in future.

Would you rather be paid $10, 000 a day to dig a ditch every day for a month? Or would you rather start with a cent and have your pay doubled each day for the same month?”

Naturally, our choice would favor the $10, 000 a day term rather than been paid a cent. It’s a lot much more money than a cent and it doesn’t look like a cent would ever mount up to the amount of money one could make from earning $10, 000 daily.

But let’s see…

If you asked to be paid $10, 000 a day, and you begin work on January 1, the total amount of money you would make at the end of the month (that’s January 31st) is
$310,000. This is certainly not small money if you ask me, but could earning a cent per day and doubling it each day be better?

If your choice was the latter, then you would get 2 cents the second day, 4 the third, and $5.12 on the tenth day. This doesn’t seem a good choice, does it? Okay, let’s continue.

On the fifteenth day you would receive $163.84 and then $5,242.88 at the close of work on the twentieth day. I’m sure at this point you are probably thinking you would never be able to make as much money as you would have made if you had gone with the first choice.

But hold on, here comes the money-making and wealth building magic of compounding interest.

On the twenty-fifth day, you would be paid $167,772.16, which becomes
$1,342,177.28 on the twenty-eight (unbelievable!)

Finally, at the end of the month, you would smile home with $10,737,418.24 [that’s close to eleven million dollars]. Can you beat that! That’s the power of multiplying your money geometrically when you invest it.

Even if you were paid $50,000 daily for the month, you would still not have earned anywhere close to the money you would make doubling your earnings daily starting with just a cent.

The bottom line here is that the surest way to building wealth, making money, and securing a financially free future is by saving a part of your salary or income and investing it, and then reinvesting the proceeds repeatedly.

Don’t be deceived into not saving a part of your income and investing it by the thought that you earn small money and so do not usually have anything left to invest after paying for all your expenses. Consider paying yourself first.

Take 10% out of your salary or wage immediately you receive it, no matter how small it might seem and put it in a savings account. By the time the money is big enough you can then put it into a profitable investment.

Follow this idea religiously and you are on your way to building a money surplus, wealthy and happy life in future. The future will soon come, so don’t delay!

One thought on “Ideas to Make More Money and Build Your Wealth: Applying the Power of Compounding Interest

  1. Allen Taylor

    Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

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