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Create a money machine
Harness the power of compounding
Do you find yourself wondering how you’ll make enough money to achieve your financial goals? Are you dreaming of retirement but can’t imagine how you’ll find the money to do so? Is traveling or another large goal at the forefront of your mind? Don’t be discouraged if you’re unsure of how you’ll achieve these goals – you don’t have to win the lottery. You can absolutely become financially independent in your life without ever having to make a fortune in annual income. It starts by giving up the illusion that you have to hit a home run or make a giant score, and instead decide right now you will make your money work for you so you don’t have to. You need to decide to create a money machine.
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, even though James invested for a longer amount of time? 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. The biggest takeaway is to start investing and harnessing the power of compounding as soon as possible – that’s how to make a money machine. It’s a power that gives you an insurmountable edge and a way to continue building your net worth for life. In fact, Albert Einstein once called compounding the most important invention in all of human history!
The best part about this advice is that 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, and stick to it. 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-making 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.