Compounding Effect can buy you things you have never imagined

Learn Effect of Compounding – Be Financially Free

Of course, Money can not buy the time, not the fun you can do in your 20’s. If you think so, You need to understand what I am trying to say.

Photo by Jp Valery on Unsplash

Every person who born, have limited time and energy, but money can be earned in that period.

Three part of Life

There are three main stages our life passes through:

  1. Childhood – We don’t have money but have a lot of free time but we can not earn money.
  2. Adulthood – We have money, We manage to earn it somehow, But don’t have time.
  3. Oldage – We have money, we have time, But not enough energy.

So, You will think like, you should spend your earning which is earned by you doing a lot of hard work and enjoy life always as you wanted. You are young, you warn a good sum of money, Your take-home pay is good enough to pay your bills and have a great life. Of course, you should enjoy your life.

But if you keep working like this, and live paycheck to paycheck, then my friend this is not a good thing. You are not buying the time from the future. Of course, there is no guarantee that you are going to live after 10 years. But what if you are alive.

Just Think? How money things works in Real World

Have you ever give a serious thought about it? Why rich becomes rich and poor becomes poor?

You should think, If you spend a lot of your money, which you have earned by doing a lot of hard work, and after 10 – 20 years, you have to work for earning money, but somehow your energy will be less, your smartness and efficiency will decrease, you can not work your whole life working like a young boy.

Someday you have to think about it, just give it a thought, Soon you understand this, better for you.

And before you come into that situation, you should have some goals to achieve by the time such that the money you saved and invested over the amount of time, will work for you in the future and keeps your lifestyle the same without doing work.

Think your current saving as the amount you are paying now for buying the time you need to give someone (by working for someone else).

Buy the Freedom of your life from Future

You are just paying the charge, for your future free time.

Those who are not saving their money and investing it will don’t understand the concept of compounding either. A very few people can understand it and use it to take benefit from it and they will use their money to get things done.

Have you ever seen, the person who is your boss or someone, they are buying your time for money, and get their things done, the work done by your can later help them to earn a lot.

So, This is the reason you should start early, and by the time from your future, So, that one day in 10 or 20 years down the line, you don’t have to work for someone else, by the time you should have sufficient money which can pay your bills for years.

And your amount is not going to decrease over time, as If you understand the compounding effect, then you get to know, Your money will earn you sufficient amount to pay your bills, live a rich lifestyle which even people living paycheck to paycheck can not even understand.

So, choose wisely…

  1. Live Paycheck to Paycheck till die
  2. Get money work for You and achieve such amount that will pay your bills

If you have choosen 2nd option, you really have good attitude towards money.

Now the thing you say is, how money can work for me?

Check out our similar post Importance of Dividend Stocks in Our Portfolio

It’s very simple, you just have to start saving a part of your income and start investing your money in stock market, Cryptocurrencies and mutual funds are very popular options. (I have listed popular platforms you can use in India to get started, You just need pan card for that).

Now, think like if your overall return per year is around 10% or more, your invested amount of 1 lac becomes 2 lac in 10 years or less. And stock market is the ocean which can fulfil your all money dreams if invested wisely in good companies.

Let’s calculate how compounding works…

Compounding calculations

Year, Investment Amount (at start of year), Final Amount (at end of year 10% return + main amount)

1st Year, 1,00,000 –> 1,10,000 (1,00,000 + 10,000)

2nd Year, 1,10,000 –> 1,21,000 (1,10,000 + 11,000)

3rd Year, 1,21,000 –> 1,33,100 (1,21,000 + 12,100)

4th Year, 1,33,100 –> 1,46,410 (1,33,100 + 13,310)

5th Year, 1,46,410 –> 1,61,051 (1,46,410 + 14,641)

6th Year, 1,61,051 –> 1,77,156 (1,61,051 + 16,105)

7th Year, 1,77,156 –> 1,94,871 (1,77,156 + 17,715)

8th Year, 1,94,871 –> 2,14,358 (1,94,871 + 19,487)

9th Year, 2,14,358 –> 2,35,793 (2,14,358 + 21,435)

10th Year, 2,35,793 –> 2,59,372 (2,35,793 + 23,579)

Higher the Return on Investment more you buy your future time

The higher the interest or say return you will earn in stock market, higher the financial freedom you can achieve.

This is just if you invested the only 1lac, and If you keep investing for more than 10-15 years, You can earn a decent amount by the time, such that you can easily pay your bills without worrying about going for a job.

Get things done, Use Professionals help

If you don’t have much knowledge about stock, you should go ahead with professionals like using Mutual Funds and have the professional who can give you the best return they can by investing your money and take a small charge out of it for handling your money wisely.

Check out our similar post 5 Popular reasons to get started with SIP in Mutual fund

In this way, If you keep saving your money, it can be built an additional income stream for you and you can be financially free for the rest of your life without worrying about doing the work you hate and going to the office.

You can simply live a life you ever wanted.

Work on something you always wanted to do, and enjoy the life happily.

You can easily start your SIP with various platforms, which are giving good options to start investing with a little money as 100 Rs.

It is not needed to open your Demat account but it is needed an account to be verified with your pan card. However, we advise you to open your Demat account ASAP. It gives you control over your investment in individual stocks too.

I have also listed few popular platforms where you can get started and invest in cryptocurrencies too.

Some platforms providing the service to get started.
  1. Upstox (Mutual Fund)
  2. Zerodha (Coin)
  3. Paytm Money (Mutual Fund)
  4. WazirX (CryptoCurrency)
  5. CoinSwitch (CryptoCurrency)

There are many other platforms too but we have this, these platforms are very convenient for us to make steady investments and comes with good control.

You can also contact us if you want our help for creating your account. Just Ping us on our WhatsApp.

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Disclaimer: The article is purely for informational and educational purpose only, and is not a solicitation to buy, sell securities and cryptocurrencies mentioned in the article. EGrasps and the author do not accept culpability for losses and/or damages arising based on information in this article.

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