Yaaawwwwnnnnn

Richard Russell put together an awesome table to illustrate how money works for you.  Very boring subject, very powerful concept.  If you ever plan to retire or put your children through college, I suggest you pay attention.  The Dow Theory Letters drop knowledge:

One of the most important lessons for living in the modern world is that to survive you've got to have money. But to live (survive) happily, you must have love, health (mental and physical), freedom, intellectual stimulation -- and money.

Compounding is the royal road to riches. Compounding is the safe road, the sure road, and fortunately, anybody can do it. All you need is time, time to allow the power of compounding to work for you.

But there are two catches in the compounding process. The first is obvious -- compounding may involve sacrifice (you can't spend it and still save it). Second, compounding is boring -- b-o-r-i-n-g. Or I should say it's boring until (after seven or eight years) the money starts to pour in.

You do not have to understand money to understand this concept, click the picture and give it 2 minutes of attention.

Comments

[Chris Rock]

But how much for a rib??

[M1EK]

As I remarked at Barry Ritholz's blog, this vastly overstates the gains since it doesn't account for inflation at all.

[PZoll]

This is interesting BUT: it assumes a 10% annual return, not very likely without substantial risk in today's (or for that matter, historical) conditions. The premise is sound: start saving early.

[fred krueger]

more realistic: 8% gain before fees. 7% gain after fees. 4% gian after fees and taxes. 0% gain after inflation