Compound growth is magical. If you know how to harness its power, you can become filthy rich. You plant a little seed and it keeps growing and growing. At first it happens slowly, and then it snowballs and grows at a rapid pace!
Albert Einstein reportedly said “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
TIME is the most powerful variable in the compound growth equation. In the early years, not a lot of magic is happening. The majority of your portfolio is just what you put into the account. But as the years go on, you get growth on the growth and the numbers begin to snowball. This is the power of compounding.
Remember, this powerful force only works for you when you are investing. This same force works against you when you are in debt. The interest compounds what you owe. This is another reason to focus on paying off all high interest debt that you have before you focus on investing. The faster you pay it off, the less interest you have to pay.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Vivi & Shane
