Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.
Create a money machine
Harness the power of compounding
Legal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity and based on increased business derived by Creative Planning from his services.
How? Step one to financial freedom is to tap into the power of compounding.
Let’s make this real with an example from Burton Malkiel, author of the classic finance book A Random Walk Down Wall Street. Imagine two brothers; William and James. William invests $4,000 annually starting at age 20 – and at age 40, he stops. His brother James invests $4,000 annually starting at age 40 – and at age 65, he stops. Now, imagine these brothers, now both 65 years old, are comparing their returns.
Which brother has more money in his account at the age of retirement?
The answer is William who started sooner and tapped the power of compounding. But here’s the kicker – how much more does he have? Get this – 600% more!
The end result is William ends up with $2.5 million, and James – who saved all the way to 65 – has less than $400,000. That’s a gap of over $2 million!
This example – and the corresponding advice to tap into the power of compounding – applies to you no matter where you are on your personal timeline. It’s a power that gives you an insurmountable edge and a money machine for life. In fact, Albert Einstein once called compounding the most important invention in all of human history!
The best part about this is you can take full advantage of the power of compounding today. Here’s how: Make the most important decision of your life right now by deciding what portion of your paycheck you will pay yourself – off the top – before you spend a single dollar on your expenses. How much of your paycheck will you leave untouched no matter what else is going on in your life?
Decide on this number today. The rest of your life will be determined by your decision to keep this percentage of your income in order to always have money for yourself and your family in your future. Do this, and you will be building a money machine that makes you money while you sleep, doesn’t stop working if you stop working and enables you to walk the path to financial freedom.