Power of Compounding – Get Rich Slowly

Power of Compounding – Get Rich Slowly

What Kind of Retirement are you looking for and at what age you would like to retire? IF you are in age group of 20-25 and you think its not the right time to think about retirement,If you are saying … I’ll think about it may be 5 or 10 years later. Think again. The more you wait the more you would have to pay. You may Delay your planning but the time will not delay.

Lets take a look at the two Friends Raj and Rohan. Raj starts to invest at an early age and invests 5000 each year for the 5 years and Rohan was enjoying all this time spending all his money on unnecessary things. 5 year later he also starts investing …now look below the table assuming 15% rate of return. Raj stops investing after 5 years and let his money grow without touching it till he is 50 while Rohan keeps investing till the end of 50 year. 

	Raj		Rohan
Age	Annual Investment	Year End Value	Annual Investment	Year End Value	Rate of return
21	5000	5750			15
22	5000	12362.5			15
23	5000	19966.875			15
24	5000	28711.90625			15
25	5000	38768.69219			15
26		44583.99602	5000	5750	15
27		51271.59542	5000	12362.5	15
28		58962.33473	5000	19966.875	15
29		67806.68494	5000	28711.90625	15
30		77977.68768	5000	38768.69219	15
31		89674.34083	5000	50333.99602	15
32		103125.492	5000	63634.09542	15
33		118594.3158	5000	78929.20973	15
34		136383.4631	5000	96518.59119	15
35		156840.9826	5000	116746.3799	15
36		180367.13	5000	140008.3368	15
37		207422.1995	5000	166759.5874	15
38		238535.5294	5000	197523.5255	15
39		274315.8588	5000	232902.0543	15
40		315463.2376	5000	273587.3625	15
41		362782.7233	5000	320375.4668	15
42		417200.1317	5000	374181.7868	15
43		479780.1515	5000	436059.0549	15
44		551747.1742	5000	507217.9131	15
45		634509.2504	5000	589050.6001	15
46		729685.6379	5000	683158.1901	15
47		839138.4836	5000	791381.9186	15
48		965009.2561	5000	915839.2064	15
49		1109760.645	5000	1058965.087	15
50		1276224.7	5000	1223559.9	15
Total Investment	25000		125000

 

Vooo …. You see now Raj has invested only 25 thousand while Rohan has invested 1 lac and 25 thousand still the return for Raj is more than Rohan. For Raj 25K turns to 12.76lac and for Rohan 1.25lac turns to 12.23lac so that’s the power of compounding. So you can choose to be Raj and invest early and enjoy the rest of life without investing as Raj Enjoyed for remaining 45 Years or be Rohan and pay all your life for starting late. (Even if you feel that the 15% return figure is unrealistic still with any constant rate of return you will get similar type of statastics only number may differ.)Do you want to know what would have be the value at end of 50 year if Raj would have kept investing till the end with Rohan it would have been 25 lacs with just investment of 5k per year.

There is nothing new about Power of compounding, the only thing is that we are ignorant most of the time and don’t take the steps which should have been taken long time back. Another thing saying I can’t afford to invest now is nothing but just mental laziness, if sit down and exercise your brain you will see that there are many ways and you will be able to figure out a plan for yourself. Think of the loan term benefits and goals. Time is more valuable than money, learn to value your time and time will value you.

Nothing can stop you from getting Rich now। If you Don’t earn a lot and have lot of responsibility, start early start with little amount and get rich slowly. Patience pays you just need to have a little of it. If you do not spend less than you earn, and if you do not save the difference, you cannot build the wealth you desire. The rich are not rich because they earn a lot of money; the rich are rich because they save a lot of money.

At Last i would just live to quote few words by Jim Rohn

If you don't design your own life plan,
chances are you'll fall into someone else's plan.
And guess what they have planned for you?Not much.