The Mathematics of Compounding Is Astounding

A day wasted or a decision delayed is expensive. Perhaps that's one of the reasons people who start early seldom lose their lead. Let's look at some examples of the mathematics of compounding:

You're 30 years old, and a company you founded currently earns $50,000 a year. What will it earn when you are 45 if earnings grow at a modest six percent a year? 

Answer: $120,000.

What if everything above remained constant, except that earnings increased at 12 percent a year? Just double it to $240,000, right? Wrong. 

Answer: $273,000. 

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Let's raise our sights. Your company now earns $100,000 annually. What will earnings be if you decide to retire in 15 years, given earnings growth of 10 percent a year? 

Answer: $418,000.

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Reaching even higher, the organization you founded nine years ago when you were 30 is earning $100,000 annually. 

What will it earn when you're 60, assuming growth at a realistic 12 percent a year? 

Answer: $1,080,000. 

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Bingo. A million dollars a year in earnings through the mathematics of compounding. 

Money grows as a result of two forces-time and rate. Another reason to set your goals and get off the starting block early. Go get 'em!