How To Make Your Investments Explode

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How To Make Your Investments Explode

In the west, our working lives are generally structured so that we earn the more as we progress. By the time we reach our mid-forties, we have have more than likely reached a peak of our earnings. There is a huge problem with this model, because inflation bites at our salary at almost every step of the way.

Consider this example. Lets says your salary increases from $20,000 to $50,000 over a twenty year period. If inflation remains constant at roughly 2% per year, that amounts to 40% inflation over twenty years. That means that inflation eats out $20,000 of that salary and your purchasing power only increases to $30,000.

 

If you switched the model and made a great effort to earn as much as possible early in your life, things would work out better. If you saved and invested aggressively for a number of years however, you could use a compounding strategy to accelerate the growth of wealth.

Of course, not everyone has access to large sums of wealth early. However, nearly everyone can probably cut their costs. Cost-cutting is by the far the easiest way to build wealth as noted by Warren Buffet many times. Buffet purchased his house early in his life, because he knew that the savings on his house could be invested and compounded significantly over the course of his lifetime. For people interested in building their household wealth significantly, you should adopt this strategy as a matter of urgency.

2017-07-27T19:14:30+00:00 June 5th, 2017|Blog|
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