Becoming Warren Buffet: Compound Interest (5)

 Anyone who has heard of Warren Buffet,knows that he is just IN LOVE with the idea of "Compound Interest".




I'll explain shortly what is compound interest and why does it matter.

There are two main types of Interest:


1)Simple Interest:

If you put 1000$ in a bank with a simple interest of 12% each year.
Year 1:(I)=120$
Year 2:(I)=120$
Year 3:(I)=120$
Etc.....



2)Compound Interest:

If you put 1000$ in a bank with a compound interest of 12% each year.
Year 1:(I)=(1000)x(0.12)=120$
This 120$ will be automatically added to the original capital (1000$), now the capital is 1120$
Year 2:(I)=(1120)x(0.12)=224$
This 224 will be added to the capital (1120$), now the capital is (1344$)
and so on and so on till infinity.

So now you know what is compound interest, it's time to know why it does matter?


This a photo showing how a penny multiplies each day for a month and how it grows.





This is exactly why compound interest is great, and why Warren Buffet who is the best investor ever born fell in love with compound interest.

Now compound interest is found everywhere, in all bank, all countries, all everything, so why all people aren't rich when it's that easy?

I'll tell you why, and I'll tell you why almost everyone could retire as a millionaire so easily.

Most people have problems with managing their finances, dealing with debt, making a budget, and they have problems with what they desire in the first place.

In our modern world, there are billions of different products made every single day, and every single day new things appear, new technologies, new flavours, new recipes, new solutions, and new services, and with a good marketing campaign, they could let you desire this product intensively and feel like your whole world would be different if you bought it, truth is, it won't.


SO now I hope we agree that the main problem is people buy what they need and don't need, so they end up paying all their income mostly on unnecessary things, and they even end up with debt because they buy on credit.

I'll talk deeply about this topic because it's almost the most important thing in being rich, it's always Make Money, Save Money, Invest Money, and the saving process is very important because if you don't save you don't invest.

So that is one of the biggest factors that made Warren Buffet end up with this great capital, is compound interest, followed up by living as a regular guy, not as a billionaire.

Compound Interest with little liabilities and no desire to impress anyone would make you retire as a millionaire, but you choose not to be with your spending habits.

Hope this was helpful and I hope that you're following up with the series, I'd really be happy if I heard from you, and I wish you great success in life.

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