Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/a26f9f83/public_html/articles/includes/config.php on line 159
Financial Intelligence - Compounding (The Ninth Wonder of the World) > NetSparsh - Viral Content you Love & Share

Financial Intelligence - Compounding (The Ninth Wonder of the World)

Compounding: The Ninth Wonder of the World
By Nicola Cairncross

Compounding is often described as the ninth wonder of the world. It is a concept that initially sounds quite dull, but when you understand how compounding just quietly works its magic - or conversely its naughtiness ? it's a very exciting concept to grasp indeed!

Compounding is the difference between linear and exponential growth, or put more simply, about earning (or incurring) interest on the interest on the interest, generated by your savings (or your debt). On an energy level, it's about making sure that every little bit of effort you expend, works on many different levels to bring a reward greater than the original effort required.

It's a very powerful tool and can be likened to the wind under the wings of a jet. The plane creeps slowly, slowly along the approach runways, then moves into position, then starts down the runway slowly, but as it picks up speed, the power of the engines and the wind lifts its wings and it takes off, climbing very quickly and steeply into the sky.

Compounding can turn just one ? just one - £1 or $1 into a million pounds or dollars within 20 years. If you took £1 or $1 and achieved a 100% return on your money each year (put another way, if you doubled your money each year) then you would most certainly be a millionaire in your lifetime. Imagine if you added another £1 or $1 each year ? how much faster would that get you there?

And if compounding is that powerful when applied annually, how much powerful could it be when applied monthly or even daily?

On a personal finance level, most people ignore the potential of compounding, because the % interest rates we are quoted by the banks, other savings vehicles and financial institutions are so paltry. If you took your pound or dollar and increased it at the usual 3% or 4% per annum, then it would grow so slowly that we might as well not bother saving at all. You would be dead several times over before your personal wealth increased noticeably.

I know I used to feel like that! Why save now, I thought, especially when you are only saving to spend later, and when you can only earn 3-4% per year on your savings? I want to share with you, today, some of the exciting things that I learned about the power of compounding, things made a huge difference to my thinking about money. And changed me from a non-saver to an investor in one fell swoop!

There is a huge difference between saving and investing, and experienced Investors achieve returns on their money between 30% and 100% per annum ? some even manage to achieve an infinity return on their investment, because they are able to pull their own money back out of the deal, which means that they are making money with no money! These are the supermodels of the investment world!

On a personal finance front, even looking at the returns generated by investing in property over the years (12% per annum) and the stockmarket (14% per annum) gets a little more exciting. The compounding effect means that, on average, property doubles in value every 7-10 years ? that's a thrilling thought! How would you plan your property investment differently if you knew that to be true?

There is a great example of the difference in what you can achieve in just two years, if you invest £60,000 (or dollars! I'm going to work in pounds now but the principle is the same!) by buying outright one small rental unit, versus what you would achieve if you invested the same £60,000 in deposits on several small rental units.

At the end of the two years, if you just bought the one unit, and assuming average rates of growth, you would be worth £6384 more than when you started. But if you invested in deposits on several units, you would be £56,304 better off. You choose. That's compounding at work.

On a business level, compounding can work for you too. The difference between what you can earn if you are a solo self-employed person, and what you can earn if you build a business consisting of a team of "you's" is quite amazing.

The compounding effect can also be utilised in your business by automating as many of your business processes as possible. Think of the potential difference between having the services of one marketing person and one sales person (both of whom can only work so many hours in a day, both have to be paid, even when they are on holiday or off sick, so not working) and then consider the possibilities of having an automated marketing machine working 24/7 plus a team of affiliates ? unlimited numbers of independent people who are all being paid a little bit, on sales (results only!) to promote your service or product.

Nicola Cairncross is a specialist Wealth Coach, Hotelier and Internet Entrepreneur, working with bright, entrepreneurial people to enhance their financial intelligence. Visit her website at www.nicolacairncross.com.

If you would like a more detailed copy of the flats investment example in this article, just email [email protected]).

Visit http://www.nicolacairncross.com/free.htm and join the mailing list to enjoy downloading some awesome free resources including a 13 page report on how to create Financially Intelligent Bank Accounts.

In The News:

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

WV News

'Community Wealth Building' opportunities available in new year
WV News
“(There were) some different ideas of how we can use what we have out here — our strengths — to continue to build on them, and to keep wealth building within our communities, rather than the wealth leading our communities,” Bristow said. Mike Battle ...

and more »

Richmond.com

The Color of Money: Make sure you don't miss the memo for financial freedom
Richmond.com
2: The way you think about money can help you lose or gain wealth. “I believe that fully half of modern poverty — beyond basic issues of sustenance, of course — is tied to a poor mindset, to low self-esteem and a lack of confidence,” Bryant writes ...

and more »

Maui Now

How to Build Wealth While Avoiding Capital Gain Taxes
Maui Now
Barbara S. Potts, RB and Lee Potts, RB of Aloha Group Maui, KW Island Living answer the question, “How can you build wealth and avoid big capital gains taxes?” Barbara Potts: Did you know that a 1031 Exchange allows you to defer taxes on the sale of an ...

and more »

CNBC

10 bad money habits to break to build more wealth in 2018
CNBC
Enrolling in your employer's 401(k) plan, a Roth IRA or traditional IRA — a tax-advantaged retirement savings accounts that allow you to build wealth over time — is one of the simplest ways to invest. There are also apps that aim to make investing ...

and more »

TCPalm

WEALTH MANAGEMENT: Building a strong financial foundation
TCPalm
Although it is convenient to say “charge it,” buying on credit tends to cater to more impulsive shopping urges. Credit cards also can create an illusion of wealth, tempting you to buy things you cannot afford. If you carry large balances and make only ...


Seeking Alpha

How To Build Long-Term Wealth
Seeking Alpha
Too often investors are focused on the wrong variables in seeking to build wealth for the long run. It is important that investors follow a disciplined approach to asset allocation that seeks to manage risk and produce superior returns over the long ...


Madison.com

3 Stocks That Turned $10000 Into $1.4 Million
Madison.com
One of the most powerful ways to build wealth is to invest in great companies and then hold them for the long term. And while investing in young, growth-oriented companies looking to disrupt an industry or even creating new ones can pay off with big ...

and more »

My Top SWAN Pick For 2018: Tanger Is A Wealth-Building Machine
Seeking Alpha
Tanger remains an industry leader that strives to provide superior experience to consumers, retail-partners and shareholders. Tanger has honed this skill over many years and has developed a reputation in the retailer community for being a marketing ...


HuffPost

Honoring Dr. King by Addressing the Racial Wealth Divide
HuffPost
For each of the three years of the project (2015-2018), the Northwest Area Foundation is granting $1.2 million ($200,000 each) to the six communities of practice to design and develop innovative pilot projects that improve and protect the economic ...


CEDR: Build joy and wealth in your business
Daily Astorian
We are excited to announce an essential business workshop for the regional business community on Tuesday, Jan. 16 — “Building Joy & Wealth In Your Business.” This workshop helps business owners understand the current value of their business and what ...

Google News

6 Proven Wealth Building Strategies

Building wealth is as simple as saving a little bit... Read More

Who Wants To Be A Millionaire?

Steve Martin once delivered an opening monologue for Saturday Night... Read More

10 Ways to Save $50 Per Month: The Art of Pinching a Penny Until It Screams

1. Save up to 50% per month on convenience cleaner... Read More

Compounding: The Science Of Exponential Money Generation

It all begins with a simple calculation.You are home on... Read More

My Entrepreneurial Fire-I Grabbed My First Million Before I Got Too Old

My First Million took me exactly 27 months to achieve.... Read More

Rich or Poor - Get the Knowledge

Most people work hard all their lives only to "retire"... Read More

Re-discovering the Fundamentals of Financial Planning

To lose weight in the 80's, we went on low-calorie... Read More

What Are Your Beliefs About Money and Wealth?

What is your attitude towards having wealth? Do you believe... Read More

Do You Want Money?

Let me ask you a very simple question. Do you... Read More

Residual Income - The Myth

"Join our program and retire in 3 months..." yeah, right.We... Read More

Who Else Is Tired of Life Punching Them in the Face?

Remember the bloodied face of Randall "Tex" Cobb?He was a... Read More

The Top 10 Steps to Extraordinary Personal Wealth

I recently came across startling figures about the average American's... Read More

Methods Of Raising Instant Cash

The inability to come up with the necessary cash when... Read More

Wealth Creation - Opportunity

When young men ask me how to succeed, I tell... Read More

Is Accumulating a $1,000,000 Net Worth Easy? Yes and NO

Is accumulating wealth as easy as following a 3-step plan?... Read More

What is Your Creative Retirement Plan?

The idle are a peculiar kind of dead that cannot... Read More

You Can`t Cheat An Honest Man

Author: James Walsh ISBN: 1563431696: Publisher: Silver Lake PublishingIn... Read More

Saving Money By Spending Wisely

Why is it that the older and richer people become,... Read More

Creating Money, Prosperity, and Abundance Now (Part 2)

Giving and ReceivingIt seems that people generally find it easy... Read More

Creating Money, Prosperity, and Abundance Now (Part 1)

I have given many prosperity lectures over the years and,... Read More

Four Pillars of Creating Wealth

Some people in this world are thinking that their poor... Read More

Tax Strategy - Theres More to Building Wealth than Clipping Coupons

We talked recently about the wealth formula:Spend less than you... Read More

Residual Income - Part Three Finding Leaders

In my last article on Creating Residual Income I mentioned... Read More

16 Mantras for Building Financial Wealth

Everyone wants to be wealthy, but most of us do... Read More

Why Get Rich When You Can Be Wealthy?

"Any fool can rich, the wise get wealthy." Chris WidenerGetting... Read More