Do you think you would get hit by lightning? Then why play the lottery; the chances are similiar. Follow these simple steps to guarentee you have a lottery sized bank account.
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. If your under 40 you probably won’t get money from any of the above mentioned sources. 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. Everyone can live stress free when you know that you are secure financially at a young 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 sooner you begin, the more time that you are able to benefit from compounding interest.
Just by reinvesting money that you’re investments returned, the money you earned in interest last year is making you money. This is powerful because after 10 years of returns you will be making money off all your returns for the prior 10 years.
Jump online and check out free compounding interest calculators to see for yourself. It’s motivating to see first hand the powerful effects that compounding interest has on your money.
Calculating compounding interest. Mess around with a compounding interest caculator. 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. Real estate investing is a vehicle that will allow you to benefit from leverage.
When you invest in stocks for instance, you are generating a return based on the principle amount that you invest. Real estate allows you to earn returns based on the value of the property. 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 is based of the asset value of the property you control – in this case that would be $200,000. So the value of your property after the first year would be $220,000 ($200,000 x 1. 1).
In a perfect world where the property increases ten percent annually, the value in the third year would be $266,200 and after 10 years it could be valued over $500,000. When you are able to leverage your investments, compounding interest may work more to your advantage. 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.