This Is The Power Of Compound Interest And How It Works

foreign here's quick example if you invest ten thousand dollars and you get ten percent annual return which by the way people go what do you get 10 return if you look at the 500 which essentially is The Benchmark index for the stock market it's the top 500 companies if you look at that the average return has been 10 to 12 percent since its Inception so this is not an outrageous claim that you could get 10 average annual return not every year some years it may be down 22 percent some years it's up 20 who knows but that ten ten thousand dollars at ten percent return and if you just leave that ten thousand alone for 40 years here's what happens at year one you're at ten thousand year ten you're almost at 26. by year 20 you're at sixty seven thousand 30 years in you're at 175 000 and then 40 years in you're at 452 000 is that not amazing that's fantastic and remember you only put in 10. and so the total growth on that was 442 000 of money that you didn't put in it was just your interest earning interest so how does that happen well let's talk through an example of this and the power of starting early because lot of people they they aren't maybe they're not there yet Ken either they have debt they don't have the emergency fund they're in their 40s or 50s or 60s they feel like it's too late they feel like they don't have the knowledge let's take someone my age George I'm 48. boy all right wasn't gonna go that old Ken was gonna go well the example here you can see you can change the numbers on the example but let's say this guy Ben who starts at 21. right one kid he his parents went through FPU he did this stuff and he invests 2 400 bucks year you got that just 2400 2400 year it's not lot that's 200 month yeah and he stops contributing at age 30. so from 21 to 30 2400 bucks year the total amount he contributed was 21 600 bucks now his buddy Joey little older he started investing at age 30 and he invests 2 400 year as well and he contributes until he is 67. so instead of nine years he contributes for 37 years and the total amount he contributes 88 800. now in your mind Ken without doing math you're going well Joey's got to have more Joey's ahead he invested for lot longer period of time you would be what's known as wrong because at age 67 Ben's investment remember his 21 000 he put in has grown to 2.1 million dollars Joey's investment has grown to 1.2 million dollars so that nine-year difference that nine-year Gap from when Ben started to when Joey started was difference of close to 1 million dollars is that not wild it's crazy now some people hear that and they go well wait second is it too late for me no because what about the guy who started at 30. the best time to plant tree was 20 years ago the next best time is today and so regardless of where you're at you got to start and if you're 50 well still if you let's say it's 70 years old you still have 20 years of compound growth to take advantage of and if you're young and you follow this plan you go hey what if could graduate debt free what if could get out of all my debt cut up the cards have an emergency fund begin investing 15 within normal income you're going to be multi-millionaire if you just start when you're out of college and so regardless of your age the key here is to get started as soon as you can and the right time to start investing Ken is once you're out of Consumer Debt with fully funded emergency fund now lot of people get mad at us for this because they go my gosh you're going to make me throw away the company match part of the reason you don't have the margin to invest 15 is because you're carrying all this debt your broke living paycheck to paycheck and you're trying to get this three percent match what if for season you paused you went down to zero on the match zero on your investing so that you had more margins to throw at the debt now we're added at faster and we're back to 15 once we come back to investing so it's powerful powerful principle to take advantage of compound interest compound growth capital appreciation whatever nerdy word you want to throw on it and the key is you don't have to be genius investor mean our millionaire study found that most of them were mediocre investors that just invested consistently over long period of time in 401k and Roth IRA in growth stock mutual funds and they didn't even pick the best ones they just went all right this is not super volatile investment it's not single stock it's not crypto I'm just going to invest in my retirement plan and they became millionaires by doing that and the average age was 49. so you're right on track Ken look at that we get started at 49 no they became millionaire average age for the millionaires in our study of over 10 000. see so somewhere younger some are older gotcha but it just goes to show you if you just follow proven plan you don't have to make bajillion dollars to be doctor or lawyer you can build wealth on your terms without having to strike it rich or get an inheritance or do all these crazy things