Why Your Net Worth Explodes At $100K

[Music] are you tired of saving money in a piggy bank are you ready to add a little boom to your bank statements well once you reach $100,000 get ready to explode your net worth like never before it's easy just invest wait patiently and watch the magic happen boom but wait there's more this is your ticket to Financial Freedom and the retirement of your dreams say goodbye to boring old bank accounts and hello to your financial future all right it's time to blow your mind kids so get ready for the wealth secret that will explode your net worth in a good way but before we light up the stick of TNT light up those like subscribe and share buttons like Uncle Richie on July 4th obviously before the Roman Candle incident it's a lot easier to click buttons when you have all your digits now in order to understand why your net worth takes off once you reach six figures we got to do a little crash course on the eighth wonder of the world nope not your stepdad's extra big toe that's weird I'm talking about compound interest to put it simply compound interest is the interest do you earn on your Investments so with compound interest not only do you earn interest from your original amount of money or the principal balance but you also earn on top of the interest you've already made through that investment and our boy Benjamin Franklin explained it best when he said money makes money and the money that money makes makes money nope not a rap lyric just Ben Franklin spitting bars oh B Ben Franklin and this should be pretty so basically your earnings are continually reinvested and this leads to Crazy growth helping your money grow faster and faster over time now I know sometimes these Concepts can be hard to wrap your head around so here's an example let's say you get second place at an international hacky sack competition and decide to invest your winnings of $10,000 and you get a return of 10% well after 1 year you'd have $1,000 the original $10,000 plus the $1,000 in growth that you earned in year two you'd have slightly more it would become $12,100 because you're now earning on top of the $ 11,000 B from the year before now that extra earnings doesn't seem like a big deal at first but it becomes a hack of a deal later literally because if we leave that $10,000 alone for 40 years and it compounds annually at 10% it will grow to over $452,000 and remember all you put in was $10,000 of hacky sack money now keep in mind the number of compounding periods determines how quickly your investment grows meaning that your interest can be compounded daily weekly or yearly so there's some variables to consider here and side note not a big fan of the phrase compounding periods very sterile phrase for such a magical event okay so now you might be thinking this is great and all but what if I wasn't blessed with hacky sack skills and don't have an extra 10K to play with how does all of this blast my net worth into Celestial orbit well I'll show you in just a minute but first I want to tell you about t a mobile service designed to save you money and a sponsor for today's episode T is redefining the industry with affordable phone plans that get you the same reliable coverage and features as the big guys and right now is the time to switch because they're offering more data and lower prices on every single plan for New and existing customers permanently for good and here's some more good news you get to keep your same phone and the same phone number you can just Port it over so everyone's still rocking that 2006 LG can keep rocking on and here's the best part when it comes to your wallet te pricing starts as low as five bucks and goes up to 25 bucks a month for the unlimited everything plan which includes 35 gigs of 4G LTE 5G high-speed data on T-Mobile's Towers if you know you know and here's another cool part you get to be in control of your phone plan there's no contract no fine print no Blood Oath nothing you're free to upgrade or downgrade whenever you please so go to t. com George or click the link in the description to get $5 off their unlimited data plan for your first month of service that's t. com George all right back to Building Wealth with compound interest let's use my handy dandy compound interest calculator to see how this can work for you when you're consistently investing smaller amounts of money for this example let's say I make the national average income of $59,800 well if you invest 15% of that that's $897 per year or $742 per month and let's say I've get Zer in Investments and I'm 27 years old and let's also say I'm a lazy worker and I never get a raise and I have no employer match what would that look like with our compound interest calculator all right so let's give this 8 years of consistent investing I have $0 Sav to start I'm going to contribute $742 a month and I'm going to use the average return of the S&P 500 10 to 12% we go on the Lower Side 10% calculating wow look at that $101,000 and it took 8 years to get there so it took 8 years of consistent investing to get to the first 100,000 but guess how long it takes to get to the next 100,000 well check this out from 8 to 12 now we're at 190,000 almost at 200,000 Just 4 years later so pause here why did it take only half as long to reach the second 100,000 well remember our friend compound interest this is compound interest working its magic think of it like a big beautiful snowball rolling downhill gaining snow and growing even bigger and more beautiful the further it goes once you have a big chunk of change like $100,000 your earnings start to generate their own returns so a 10% return on $100,000 is $10,000 but that new 10,000 is now making its own returns aren you proud of it look at it go I'm so proud of you so this is the fun part where your money makes money and that money makes money and you get the point so let's keep going let's see where this goes we're going to get back to the calculator here and see how long it takes for the next 100,000 to show up let's go go 15 years boom we're almost at 300,000 3 years later so it took 8 years for the first batch took 4 years for the next batch took 3 years to the next batch now just 2 years later 17 years we're now at 361 20 years in we're now at over $500,000 pretty wild so you can see how this speeds up over time it's easier to get to the next 100K As Time Marches On so 20 years in you went from $0 to over half a million and here's the craziest part go with me the contributions were only $178,000 that's the money that you put in from your income but the other 331,000 was all compound growth working for you you did nothing to earn that except keep it invested over a long period of time now get this it took 20 years to get half a million but only takes seven more to make another half million to get to that million doll Milestone so you doubled your money in just 7 years and I will prove it 27 years invested wow mind blown wow you blow my mind now by the time you have a million dollars if you're still making 10% on average you making $100,000 a year on average and in seven more years you add another million check this out let's go to 34 and we should be over 2 million look at that almost $2.

2 million so let's zoom out I'm 27 years old I got zero in Investments I invest that 742 every single month over a long period of time I have an average return of 10% after 35 years I'm 6 2 years old and guess what I am a multi-millionaire with $2. 4 million in that one account and remember that was with no raise and no employer match so the secret sauce to making the most of compound interest is regular contributions plus time maybe a splash of worsters sure if you want to get fancy we got to use this one Drone St sha no if you do those two things alone your networks will explode especially once you reach 100,000 in Investments and if you look at these numbers one more time here's what's really cool out of that 2. 4 million 2.