Figured since I spent the time writing it, that some of you might be interested in this. This is one of my response from the "Car rich, house poor" thread... https://g35driver.com/forums/lounge-off-topic/44394-car-rich-house-poor-your-financial-state.html


Yes... compound interest works best for you when you're young!! Any financial planner will tell you that. Take this scenario...

Rule of 72: Take the return you're getting (interest%), and divide by 72... this will tell you how long it'll take your money to double. (i.e. 72/6% = 12 years to double, 72/12% = 6years to double)...

2 twins @ 18yrs old (assuming 6% return):

Scenario1 (smart twin):
One starts saving $200/mo from scratch $0 at age 18-28 ($200 for 10years), and stops at age 28.
($32,775.86 with 6% compound interest at age 28)
--> @ age 65, he'll have ~$300,113.48 without contributing another dime after age 28.

Scenario1b: Continues to contribute $200/mo till 65... $626,375.10!!

Scenario2 (party animal twin):
The other laggin' a bit, partying, enjoying life, getting a new G ... and FINALLY starts saving when he turns 28. Has $0 to start with and starts saving $200/mo until he turns 65 ($200/mo for 37 years).
--> @ age 65, he'll have ~$326,261.61 contributing $200.mo after age 28 till 65.

So the morale of the story... let TIME and compound interest do the work for you... TIME is the BIG factor here in letting your money grow. Procrastinate... and you see the difference + the price you pay for waiting.

SUMMARY (assuming 6% return): **YOUR PERSONAL CHOICE**
Scenario1: ~$300,113.48 (age 18-28... stops at age 28, contributed only $200x12x10=$24,000 only!!)
Scenario2: ~$326,261.61 (age 28-65, contributed only $200x12x37=$88,800!! +$64,800 more than his twin)

**My choice below**...
Scenario1a: $626,375.10!! (age 18-65)

[NOTE: This is assuming ONLY $200/mo & 6% return compounded... now imagine if you put more into savings..., or if you have a better investment vehicle (House in a "hot" market?) ]

All of you owe me $100 for the 20min I took to write this up... jk
Hope this helps some of you guys in seeing the "BIG" picture... and happy modding!

Jason

 

Another Example - The Power of Compount Interest

If you won a bet....and the looser offered you 2 choices....
1. $500,000.00 paid in 15 days...or
2. One Penny (.01) - doubled every day(50% compound interest) for 30 days...
Which would you choose???














If you picked #1....you loose.
#2 would be worth.....over $5 million...a whopping $5,368,709.12 to be exact
Do the math......it doesn't start rolling until around day 26.

 

What ?!!?!?

 

What.....What??
Which part do you not understand?

 

Well Done Jason !


Very much so!....
blessed are those that learn this early or have parents that know these things...and pass it to them...
many of us learn stuff like this later on in life...(way past 18)...so yeah you do end up kickin yaself in the azz when you learn it....if you learn it

lol...but hey hind site is always 20/20...

then Jason says "happy modding"...LMAO
Now that we all feel like selling the damn car and investing in our retirement..you hit us with "happy modding"......what a cruel and vicious man u are....LOL

 

some great financial advice i am definetely looking into, thanks jason

and that whole penny double everyd ay is some crazy shti when you really think about it

 

Someone please let me know an investment where my interest would be compounded!!! LOL

This is depressing! LOL

 

J man, that is very interesting! Dammit im doing the complete opposite haha Although im saving up money and making some pretty good investments in the market, we'll see how it goes, smart or bad idea? What else can i do with a few $K??

 

man, you guys are depressing.. now i wish i had stayed in school and made something of myself.. oh well. "we reap what we sow.."

 

wow.......thanks jason
im young......this is def. something to think about

 

good **** jay..definatly food for thought..especially for someone like me..