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The Beauty of Compounding – Financial Freedom

As human beings very difficult for our minds to understand power of compounding is were so set on a date and time that rent however if you take a step back and look at the actual Matt will be blown away by what you can achieve over the long run. Most people underestimate what they can get done in a lifetime of work because they don’t understand how small steps will bring them that reality so what can we do to get where we need to be. What we can do is Begin by creating a very actual plan that is small at the start and turns into something gigantic overtime. Way we’re going to accomplish this is by putting together financial plan that will change your life in the long run you will not get rich quick not the goal of this exercise and it’s one in a million or not trying to hit the lottery we are trying to create a sustainable incredible future.

 

First thing I need to do no matter what is become an investor investors are often looked at as the Pinnacle of success that utilize their money to make them more money and on a grand scale yes these people can be some of the richest in the world however the principles of investing can be utilized by even the poorest of individuals.

 

In this example are going to show you how to become a millionaire overtime let seconds in mind that you’re very young reading this blog do you in if you’re not Young no problem here’s what we’re going to do that start with an initial investment of $10,000 that may seem like a very small amount of money to you may seem like an impossible amount. We’re going to use this amount as an example of a starting point let’s say we invest $10,000 into an index fund some sort with very low fees self-invested sore not eating up all her profits over time next we’re going to make a plan to put away $150 a month for the rest of our lives that is may seem again like a very large sum to you it may seem insignificant if it’s insignificant I recommend putting much more away possible.  do what you can afford and no more however I’m going to ask you to stress yourself because this money put away is going to grow at a rate at school. Let’s assume at this point you’re 25 years old got your seed money and you’ve got the $150 a month that you’re committed to putting away automatically you have to automate this is critical because if you have to do it every month Bill forget get this setup on auto payment and forget about it now we’re going to look at the time. Which is 40 Years. and they seem like a really long time to you you know what it is but life moves faster than 65 years old ready for retirement hopefully. we’re going That you’ve earned 9% annual returns over this. Which is not unrealistic over the Long Haul in the short term that might be a little bit High than the long run this is happened you’re after a year and you analyze the returns and if you do a quick calculation there you’ll see that at the end you’ll have a little over a million dollars in your Investment Portfolio.

 

the house that the power of compounding the power of time someone who can only afford to put away $150 a month is now a millionaire thanks to the power of time.  it’s similar to the concept of the beach or roading it seems like an impossible task but as the water doesn’t job minute after minute hour after hour eventually it will erode the beach away.

 

So make a decision today to commit whatever you can afford to take all the money that you don’t need that sitting in your savings account if you have one or create a plan to get that seed money you can start with 10000 that doesn’t matter start with $50 a hundred dollars thousand dollars whatever you can do start with that and try to contribute $150 a month at a bare minimum if possible. If you can afford more I highly recommend it For example if you were able to put away $250 a month in the same example it will mess you an extra half of million dollars over your lifetime start small now and as you gain more money you’ll be able to up this number.

 

so the question is are you committed to the Long Haul are you willing to sacrifice going out to dinner once a month or whatever that hundred fifty means to you for your future.

 

You can also use this concept for non financial goals which you can read more about in my blog post: Small Steps, Big Results

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