The Uninterrupted Compound Growth Curve
By Alan J. Mendlowitz, RICP, CRES
Taken from Alan's Financial Website: www.financialadvisoryservices.net
"The greatest power on earth is compound interest." -Albert Einstein
Compounding is a great way to grow your money over time. By reinvesting earnings (e.g. - dividends, interest or capital gains) you are able to earn in the future not only on the original investment but also on the re-invested earnings. Essentially, you are increasing the amount of your investment moving forward without making a contribution directly from your wallet. Compound interest works on both assets and liabilities. While compounding boosts the value of an asset more rapidly, it can also increase the amount of money owed on a loan, as interest accumulates on the unpaid principal and any previous interest charges. Simple interest differs from compound interest in that it only the principal earns interest each period. While all earnings are good, not all earnings were created equal! Understanding how the growth curve for compounding interest works is essential. It will help you realize the value of this concept as well as the actions that can kill its momentum.
What is Compounding?
CAGR – Compound Annual Growth Rate
The Compound Curve - The Snowball Effect
The Main Problem – You can’t have your cake and eat it too!
All this stuff sounds great until you realize that not everyone can afford to just let their money sit forever! Most people need the money now or at some point in the future. Once the money is spent you can try to start saving again, but the momentum of the growth curve has been stopped and you must start all over again.
Imagine there was a way to save money and spend it too! A way to let your money compound for the rest of your life while also retaining the ability to spend what you need as you need it! That’s one aspect of what I call Multitasking Money! What are you waiting for? If you want to learn more, keep reading through the Multitasking Money Blog Series.
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