Are you worried about not having enough for retirement? Are you constantly checking the stock market, searching for the next “Amazon” or “Netflix,” or concerned that another economic recession is around the corner? These anxieties often lead to excessive and unnecessary trading (portfolio rebalancing), questioning of your financial future and the path you are on, and, of course, insomnia.
On the contrary, level-headed thinking and staying invested pays off. In 2016, people across the globe were captivated by the story of a janitor who donated most of his $8-million estate. Many were stunned, not merely by the generosity, but also by the massive fortune. How do these “secret” millionaires quietly amass their wealth?
In this edition of our InsomniaCure Financial Education Rx Series, we present the single most important key to successful investing (savings): TIME VALUE OF MONEY.
It consists of two ingredients: Compound interest and time. First, we will do a simple illustration to help understand what compound interest means.
Easy, right? Let’s do a deeper dive and see what the other ingredient, time, does to compound interest. (Hint: read it over and over again until you get the idea.)
It is evident that time and compound interest are your BFFs in achieving retirement savings goals. Like Seth in our example, start early, keep contributing, and stay invested no matter what! We are helping people do just that every day!
Your BFF can also hurt you if they are used against you (rather than for you). How is that possible? Think about credit card debts, as they are one of the easiest (and most expensive) forms of consumer loans. Thanks to their high interest rates (which usually compound daily) and miscellaneous fees (such as late payment fees), which are added to the outstanding balance, the true cost of these loans can be much higher than you think.
Click here for an understanding of how credit card interest rate works and then check out the illustration below.
If you still struggle to digest this prescription, simply heed Einstein’s wisdom, and come talk to us!
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