One of the greatest minds of our time, Albert Einstein, certainly understood the power of compound interest — he considered it “the greatest discovery of the 20th century.”
But compound interest can also be considered the greatest opportunity of this century!
That’s because it doesn’t just work for the bill collector. It can work in your favor, as well, if you truly understand how to harness its power. Millionaires have learned to harness that power. That’s why they receive interest instead of paying it. Rich people may have debt, but it is “good debt” or the kind that results in a fairly quick profit for them (such as real estate holdings or business capital investment). They only engage in short-term borrowing practices that will increase their long-term net worth.
Consider this Credit Card Situation
- The amount owed on a card is $3,100.
- Interest charged is 19.9%
- The card holder only pays the minimum monthly payment of $51.43.
How long will it take to pay off the card? A whopping 39.4 years and the person will have paid $21,216.10 in compounding interest! When you look at the hard, cold numbers, it seems stupid to behave this way with money and we think, “no one in their right mind would just throw away $21k.” But as a society we have become accustomed to this kind of mentality when it comes to debt and paying interest on that debt, assuming that it is somehow “normal.” Well, it’s not.
Compound interest is one of the greatest means for building wealth on ANY income, but only if you make it work in your favor. When it comes to interest, be an Einstein and learn how to make it work for you and not against you.