Compound Interest for Poor People

By on June 12, 2018

Please don’t tell me that if I had $1,000 and invested it for 10 years at 10% interest I’d have a big pile of money. I don’t have $1,000 and paying next month’s bills is my biggest problem.
Still Poor

We’ve all seen articles on the wonders of compound interest. But most of us don’t have large sums of money just lying around waiting to be invested wisely. So we’re going to see how us ‘poor folks’ can apply compound interest to make a difference in our lives.

First, we do need to make sure everyone . Stated simply, it’s when you earn interest today on the interest that you earned yesterday. Suppose you banked $1.00 yesterday and earned one cent interest. Today you’ll be earning interest on $1.01. The interest that you earn on that one cent is called compound interest.

Unlike some financial deals, you don’t need to be a wizard to use compound interest. There are a few simple rules that apply in all cases. If you apply them you’ll improve your financial lot.

It’s always better to compound more frequently. Daily compounding is better than monthly or quarterly. You’ll begin earning interest on interest on the second day, not the second month. So you want to always choose the shortest compounding period offered to you.

More time magnifies the effects of compounding. Let’s say you put some money away today at 5% interest. That money will double in about 14 years. If you left the interest in the account you’d have twice as much money earning interest in years 15 through 28. It’s like you were getting 10% interest on your original savings. By year 29 you’ll be earning 20% interest on your original savings! The rest of the account will earn less depending upon how long it’s been in the account.

Time and compound interest, however, are a double edged sword. That 14% interest you’re paying on your credit card debt is actually much higher if you figure in compound interest.

READ  Update for Amazing Wealth System

OK, now let’s get down to how us poor folks can take advantage of compound interest. Could you find a way to save $5 per month? Maybe skip lunch at McDonalds or rent fewer movies each month. If you drive a lot you might save 2 gallons of gas by getting rid of the extra weight in the trunk of your car. Maybe send a couple of handwritten notes instead of greeting cards. If you look (and you really want to) you’ll probably find some way to save that $5 each month.

“But, at that rate it’ll take forever to save anything.” Well, let’s see. If we save $5 per month, earn 5% interest compounded monthly and continue to do that for 10 years what’ll we save? Well, we’ll have saved $600 (120 x 5). But the account will be worth $776. That’s enough for a purchase or repair bill.

“You don’t understand. I have . I can’t save money.” Oh, but you’re wrong, my plastic using friend! Let’s suppose you take that $5 per month and add it to your credit card payment. You’ll actually do better than the saver. Let’s assume that your credit card interest rate is 14% annually. After ten years you’ll have paid off an additional $1,315 in credit card balance.

Maybe you could do a little better. How about saving $5 per week? That’s about $21.50 each month. You might be able to save that much by adjusting your thermostat by one degree. Take a brown bag lunch to work one day a week. One less dinner out each month. Drop a premium cable channel or two. Maybe a combination of smaller savings.

What would that do for you? Well, if you just put $5 a week away at 5% interest you’d have saved $2,600 over 10 years. But your account would be worth $3,371. That’s a fair amount of money. A nice down payment for a car. Or you could remodel a bathroom. Or maybe you just want to spend the interest that will be earned on the $3,371 each year. You could spend about $168 every year forever and never touch your principal. Wouldn’t it be nice to know you’ll always have money for Christmas presents? Or to have a good start on your vacation each year?

READ  Is Money Evil?

Where can you earn 5% on your money? We don’t make specific investment recommendations, but the stock market has averaged just about 10% over any given 10 year period in it’s history. So you’ll be able to find mutual funds that will be able to get that type of return for you.

Some mutual funds have a minimum initial purchase of $500 or $1,000. Until you reach that level, you can use a or online bank.

But, maybe you’re deeper in debt and just can’t see your way out. You owe thousands of dollars on your credit cards. Short of Aunt Harriet leaving you an inheritance, those cards will never be paid off. Well, you could apply your $5 per week to those cards. At 14% interest you’d wipe out $5,633 in credit card debt in 10 years!

So now you have a choice to make. You can say that all that fancy compound interest stuff is just for the wealthy. Or you can recognize that the same principles work for smaller amounts. And begin to act on that knowledge. Would you give up two Big Burger meals each month to have $1,000 in ten years? Now that you know the facts, it’s up to you.

This article by Gary Foreman first appeared on and was distributed by the .

The post appeared first on .

Last step, fill out the information below or call us for Priority Assistance.

What problems are you having with your report?

Your first name is required. Your first name is required to be at least 2 characters. Your first name cannot be longer than 50 characters.
Your last name is required. Your last name is required to be at least 2 characters. Your last name cannot be longer than 50 characters.
Your email is required.
Your phone is required. Your 10 digit phone number is required.
Your state is required.
Your age is required. Your age must be greater than 18. Your age must be less than 100.

By clicking on the "Contact Me" button above, you consent, acknowledge, and agree to the following: Our Terms of Use and Privacy Policy and to receive electronic communications. We take your privacy seriously. That you are providing express "written" consent for Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS - charges may apply), even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list. Consent is not required as a condition to utilize Debt.com services and you are under no obligation to purchase anything.

By clicking on the “Contact me” button above, you consent, acknowledge, and agree to the following: (1)That you are providing express “written” consent for Lexington Law Firm, Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS – charges may apply), or dialed manually, at my residential or cellular number, even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list; and (2)Lexington Law’s and and Debt.com’s Terms of Use and Privacy Policy. Consent is not required as a condition to utilize Lexington Law or Debt.com services and you are under no obligation to purchase anything.

About Research Department

Here is where you will find important stories located from around the web which can impact you and your financial life.
safety driving украина

цена хонда срв 2016

www.steroid.in.ua/products/trenabol-atsetat
%d bloggers like this: