The Richest Man in Babylon, The Power of Compounding

Here's another thought from The Richest Man in Babylon:

Every gold piece you save is a slave to work for you. Every copper it earns is its child that also can earn for you. If you would become wealthy, then what you save must earn, and its children must earn, that all may help to give to you the abundance you crave.

What he's talking about here is the power of compounding. That's when you really start to grow your net worth -- when your money starts earning money.

It takes awhile before you get to a place where your money starts earning a significant amount on its own. But once it does, it REALLY starts to grow. And believe me, it's a beautiful thing. ;-)

Comments

[Todd]

I agree with FMF about The Richest Man in Babylon. It's a great little book (a very quick read too). As I read FMF's post about compounding, I found myself nodding my head in agreement. Then a question popped into my mind: how much is enough for the power of compounding to really make a difference? Now I'm not asking for a retirement "magic number" where you're tapping into principal. Any thoughts on a figure? I'll throw out $625,000... at that point assuming about 8% per annum things can grow pretty quickly ($50K+ per year). This is coming from someone on the low side of that figure. Anyone who's a bit further along care to add their 2 cents about where they think their figure was/is? =)

[ErikZ]

Wow, and what a life you can lead, living under the bridge, in a cardboard box with stick furniture, while waiting for your money to compound.

Of course, some people make enough money, and have the security of a steady job to encourage investing. Must be nice.

[CJ]

Erik;

I couldn't disagree with you more.

One of the best pieces I ever recieved was to "live like a college student through your twenties, so you don't have to live like a college student later on."

I have lived in a horrible apartment with only two folding plastic chairs, and the payoff was worth it.

You can invest in many different ways: money, education, time. You can choose. Make the investment up front.

The Richest man in Babylon is one of my favorites.

[anshu]

where do you go to compound? who will compound for you? any suggestions of schemes etc...