The Wonders of Compound Interest
Albert Einstein called compound interest "the greatest invention of all time." It has even been referred to as the "Eighth Wonder of the World." The trick is to get this tremendous force working for you rather than against you.
Is compound interest gobbling up a significant chunk of your earnings? If you maintain an ongoing balance with a credit card company, compound interest is costing you much more than you probably realize.
Let's start with basic interest, which is a fee that you pay to a lender for the privilege of borrowing his money. This interest is attached to the original amount at an agreed upon rate. Compound interest is calculated on the balance owing plus any previous interest charges. So then you find yourself paying interest on the interest. This compounding effect continues until it virtually takes on a life of its own. Credit card lenders make a killing putting this principle to work for them. Allow me to illustrate.
Let's say you're carrying a balance of $1,000 on a credit card with a 15% APR. If you pay only the minimum each month, you could conceivably gnaw away at this debt for over 25 years and end up repaying a total of over $3,400! If, on the other hand, you could commit yourself to paying $100 per month, this debt would be wiped out in less than a single year and the interest would come to a much less offensive $75.
Now let's look at what would happen if you took $1,000 and put it to work for you instead of against you. Let's assume that you are able to keep your hands off this money and simply let it sit and earn 6% interest compounded annually. After 12 years, your money would have doubled without you adding one extra penny!
You can quickly figure out in your head how long it will take for a sum of money to double by applying the "Rule of 72." You simply take whatever interest rate you're earning (6% in this case) and divide it into 72. The result will be the number of years required to double your money. (72/6 = 12 in our example)
You can apply the rule backwards as well. Let's say you have a lump sum of $5,000 that you would like to grow into $10,000 in 8 years. You would need to find an investment that pays 9% compound interest. (72/8 = 9). If the best you can find is an 8% return on your money (hypothetically speaking,) then it would take you 9 years to double your money. Not bad for just letting it sit there!
Now let's assume that you want to help the growth rate along, so you add an extra hundred dollars to this account just once a year. At the end of the 12 years, you would now have $3,800. If you could discipline yourself enough to add $200 a year, then you would find yourself with almost $5600. Seeing your money grow like this might well entice you to invest more money each month and really reap the benefits of this wealth-generating principle. And there's more good news. These examples demonstrate what happens when your investment compounds annually. Some institutions are more generous, compounding your interest quarterly, monthly or even daily.
It's pretty clear which end of the compound interest principle you want to be on. The first step toward the winners' circle is to pay off your existing debts. Even if you're already having trouble making ends meet, a mere $1 addition to a minimum payment can significantly shorten the life of that loan. That's right, just one dollar. You won't miss it and it would be well worth it. Remember the compounding effect. And once you're out of debt, there's no minimum for earning compound interest. Any sum that you can set aside will do. You don't need to be Donald Trump or Bill Gates in order to benefit from compound interest. It can work wonders for us all.
About The Author
Rosella Aranda, international marketer, writer and business mentor, collaborates with a team of experienced professionals to help people achieve financial health and peace of mind. To learn how to reduce your debt, view: http://www.FreeFreedomSeminar.com. For further information on how you can become financially independent, please visit http://www.FinancialFreedomWorld.com or write to email@example.com.
Bridging the Gap ? through Bridging Loans
You were on your regular walk with your wife, and you passed by this house. Then the idea struck - you want this home. A chat with the property dealer and the price was fixed. But there was a problem - a major problem to be exact.
Secured Car Loan - if Car Signifies a Second Home to You
Cars ? they are your passion, necessity, luxury, earning member. They have speed, they have music, they have curves, they have comfort, they have security, they have safety - they have something for everyone. Secured car loans can realize your car plans especially if your budget is stringent. Secured car loans options are stretched far and wide along the loan market. Buying a used car or a new car can be a pleasant ride with secured car loans.
6 Key Points to Evaluate Online Lenders
The internet is teeming with lenders who are vying for your business. It seems like everyone wants to loan you money. You are truly in the driver's seat by going online for your mortgage, refinance, and consolidation needs. But how do you select a lender? How do you choose the right institution? How do you know who to trust?
A Personal Loan And Your Rights
You can use a personal loan for many different things including, but not limited to, paying off bills, taking a vacation, buying a car and much more. Interest rates on a personal loan will vary, depending on your credit rating and the institution you are choosing to get your personal loan from. It is highly recommended that you get multiple quotes and rates before making a final decision on your loan. This way you will know if you are getting the best deal possible.
How to Get a Business Loan in Five Steps
Need funds to startup or expand your business? Follow these steps:
Should You Get A Pay Check Advance?
At some point in your working life, you may find yourself in a situation that requires fast cash. A pay check advance could be the answer to your problem. There are many ways to go about acquiring a pay check advance.
Financial Aid for College Students - Grants
The bad news about attending college is that it costs more than ever to attend. The College Board estimates the average four-year public college costs almost $5,000 per year to attend and a two-year public college is almost $2000. And that's not counting the skyrocketing cost of textbooks or other class fees. The good news is there is more than $105 billion dollars available in student financial aid. Some of this money is available for free?in the form of college grants.
Military Payday Loans! The Before Pay Check Financial Fiasco, is History Now
Working under the most prestigious service of the country ? military ? and still struggling with ends to meet! Are finances crumbling on you? And you thinking of another job? Will it easy to maintain two jobs? How would it affect your life? Is there a guarantee that the second job will solve the financial crunch? Military payday loans can offer respite from these queries, if your cash problems are temporary.
Finance Your Home Business: Six Ways Under Your Nose
There are lots of ways to get additional capital to expand a home-based business. But before you look outside for financing, leaving the decision about your company's progress and merits to someone else, consider these six ways under your nose to finance your home-based business:
Alternative Venture Finance: Federal Grants and Loans
While most companies seeking venture capital initially think about angel investors and venture capitalists, a large alternative source of financing is federal grants and loans. The two largest federal grant programs are run by the Small Business Administration (SBA), and by Small Business Investment Companies (SBICs).
Need a Personal Loan? Have Poor Credit? See if a Payday Loan Would Work For Your Needs
Poor credit and a financial emergency don't seem to mix well. However, a payday loan may work for you. Since online payday loan companies do not require a credit check, you can be approved for a short-term loan no matter your credit score.
How to Find a Good UK Secured Homeowner Loan
If you're looking for a UK secured homeowner loan, you might not know where to turn.
No Income Verification Home Equity Loan
A no income verification home equity loan is a second mortgage loan that does not require you to provide income documentation to qualify for the loan. This type of loan is great for homeowners who need a home equity loan but have hard to document income.
Cheap Loans Till Payday - Using Cash Advance Loans in an Emergency
Need extra cash till payday? It's easy to apply and be approved for an online loan till payday. If you are in need of 100 dollars to 1000 dollars or more, getting a loan till payday has never been easier. Online payday advance companies can approve your payday loan in minutes and you can have the cash you so desperately need in your checking account in a short period of time.
How to Finance a Small Business
Confused by how to finance a small business? One key to a successful business start-up and expansion is your ability to obtain and secure appropriate financing.
Everything You Need to Know About a Secured Loan
If you're not familiar with the term, a secured loan is a loan which requires a security deposit of some kind (also known as collateral) to protect the lender against nonpayment. The secured loan is the preferred type of loan for lenders who deal with people with bad credit, but is also used when purchasing certain types of property (such as an automobile or real estate.) Interest rates tend to be lower with a secured loan than with an unsecured loan (which doesn't require collateral, but charges higher interest rates to cover the additional risk.)
Bad, Credit, Student, Loans - Disjointed They Don?t Make Sense - Join Them and See the Possibilities
The day you stop learning is the day when you start decreasing your rewards. Learning is a constructive effort - who knows it better than student. A student is a 'learner' himself. There is no terminal point to the potential of a student. Abridgement of finances is the last thing that must cast a shadow on your plans. It will be like an opportunity wasted for no fault of yours. It is just the beginning of your life being a student and you are plagued with concerns like paying for your education, books, room, computer etc. you open your book and you see payments. Is there a solution to it?
Cash Loans: The Good, the Bad, and the Debt-Free
Happiness is what they're selling. Relief from the crushing weight of that gigantic rock we're all forced to carry called 'financial burden.' It's heavy and cumbersome, and the very thought of unloading it for a short time is so tempting, that some of us find it easy to throw caution to the wind and apply for the quick cash loans these small payday advance lenders offer.
Instant Car Loan - Get an Approval Online Quick
Your car loan is now less than an hour away from approval with an online car loan lender. You can have a check in hand to buy a car the next day once your online application is approved.
Benefits of a Personal Secured Loan
A Personal secured loan can offer many benefits, some of which are listed below:
|home | site map|