Issue #008: The 8th Wonder Of The World 🌎

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👋 Hey Money Peeps,

I love you all so much that I've decided to share the most POWERFUL, MAGICAL, and ULTIMATE tool that can make you rich beyond your wildest dreams.

Sounds too good to be true? Well, it ain't:

COMPOUND INTEREST

This is the tool that I can factually prove will turn absolutely anyone into a millionaire.

Shall we begin?

📈1% Better Every Day

Compound Interest 📈

This is going to be quite a math-heavy newsletter, so apologies in advance. I promise to break it down so that, regardless of your ability, it will make full sense to you!

(Sorry, I’m a bit of a nerd 🤓)

Now, let’s begin with a straightforward explanation of what compound interest is:

Compound Interest: Let's say in one year, you save £100 and get a 10% interest. Now, you have £110 in your account. The next year, you earn 10% interest not only on your initial £100 but also on the £10 you earned last year. That means you get an extra £11 in your account that year. This effect compounds, a bit like a snowball rolling down a hill, meaning the longer you let it play out, the faster it grows.

Now, let me share with you three scenarios that use compound interest and will blow your mind 🤯

Scenario 1: How anyone can become a millionaire

John is 21 years old and has just finished his final year in university. He also has a job lined up where he is earning the average graduate salary here in the UK of £24,000. John wants to have £1 million in savings at the age of 66 when he retires, giving him 45 years to get there. Let me show you how he’s gonna do it without even breaking a sweat.

Over the past 50 years, the S&P 500 has returned 10.757% (that is far too many decimal points so let’s just say 10%). This is what we are going to use to make John a millionaire.

Using a simple calculator which you can find here, we can see that John only needs to put away about £110 each month to reach his target.

In other words, John needs to invest just 5% of his salary each year (and that’s without the assumption that it will increase over those 45 years) to retire as a millionaire.

EASY

Scenario 2: Time is your BEST friend

Sam and Suzy are both fully aware of the power of saving money.

Suzy decides the moment she gets out of university at 21, she is going to put aside £2000 per year no questions asked. At the age of 35, Suzy decides she no longer wants to save any money as she has been living frugally her entire life and has already been saving for 14 years)

Sam on the other hand doesn’t think he’s earning enough to put away significant savings, so instead decides to delay saving money until he’s earning enough (which happens when he’s 35). At that point he decides to start putting away £2000 per year until retirement at age 66 (that’s 31 years of saving money).

They both average 10% interest pay year as per scenario 1.

Let’s check back in with them at the age of 66:

Suzy: £1,181,315

Sam: £400,275

That right, despite only investing for 14 years compared to Sam’s 31 years, and stopping at the age of 35, Suzy has almost 3 times as much as Sam.

Why?

Time was one her side!

Scenario 3: Average returns is what we want!

When it comes to investing, so many people want to try and beat the market and get more than that 10% return because it’s the ‘fun’ and ’sexy’ thing to do. Turns out however that 94% of active fund managers can’t beat the market, so what makes you think you can?

Average Adam earns the average salary here in the UK of £34,963. He decides he’s able to invest an average amount of 10% each year. He gets average returns of 10% from the stock market. He starts working at the average age of 20 and retires at the average age of 70.

His returns are anything but average:

£4,481,047.84

Summary:

1. Compound Interest is a financial superpower

2. Be average

3. Time is your best friend

👋 Outro

See You Next Week

Thanks again for reading another issue. I really want to make these as good as possible for you, so as always:

PLEASE HIT "REPLY" TO THIS EMAIL WITH ANY QUESTIONS OR TOPICS YOU WOULD LIKE ME TO COVER - I WILL DO MY BEST!

Till next time!

DISCLAIMER: None of the above is financial advice. This newsletter is strictly education and should not be taken as investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and always do your own research.