Money's Greatest Secret
Suppose I told you that there was a simple way that any young person could retire with
over a million dollars. Do you know it already? Did they teach it to you in school? Did your
parents tell you about it? I doubt it. So it must be a secret. The secret formula that can help
any twenty year old retire comfortably is called the rule of 72. It has only two factors, which
have to be as large as possible. One factor is time. That is why, even though the rule of 72
works for every one, I focused on young people. Nobody can give themselves back years
that have past but young people have all that time before them.  The other factor is rate of
interest. You need to get it close to 12% long term. That takes a little more explaining but
can be done by the average person. You don't have to be a financial genius. On these
pages we will give you some of the essential money facts that you need to know to become
financially independent.
Learning How Money Works
On the this page, we begin to learn how money works. On the next page, we will learn how
to avoid the biggest obstacle to our financial success, the credit trap. On the third page we
will learn how to get save money. The final two pages talk about investing. All I can do on
these pages is give you a limited overview of some of the principles. To cover everything, I
would need to write several books. One author to check out is Jane Bryant Quinn. Some of
her books are "Making The Most of Your Money" and "Everyone's Money Book." A new
book by her makes it easy. it distills it down to the simple essentials. It's easy to read,
concise, just a little over two hundred pages but it contains all you need to know to handle
every financial situation in your life. How to save money for retirement, buying a house,
college or other important goals, How to get out of and stay out of debt. How to invest. How
to buy insurance. Establishing a financial safety net. It's all here in "Smart and Simple
Financial strategies for Busy People." If you want to build a sound financial future but don't
want to spend all your time managing your money, she tells you how to quickly put a few
simple principles into practice. Once you do this very little time will be needed to maintain
steady progress toward a sound financial future.
Simple Facts
There are a lot of good financial books and a lot of good financial information on the web.
There are experts whose knowledge goes far beyond mine. But a few years ago, when I
became licensed to sell insurance and mutual funds,  I realized I had never even been
taught even the most basic facts about how money works. As you will see time is one of the
most important factors for financial success. We should all know how money works at least  
by the time we graduate from high school. Yet they don't teach us. Here I will present the
simple facts of how money works and recommend places to learn more. Once I gained this
knowledge it was very helpful but the time that I did not have to apply it was very costly. I
hope that young people attracted to the music site, will come here and learn what they
need to know about money when it can do them the most good.
Compound Interest
How money grows is the most important knowledge that you must have if you want to
achieve financial freedom. When money is invested at compound interest, you don't just
earn interest on the original money. At set periods of time you get interest on the original
money plus all the interest  it's earned. The number of times money is compounded in any
period is important. A 6% rate compounded monthly gives you more than 6% compounded
annually over the same time period. Suppose your parents had put $1000 away for you
some where and you didn't find about it till 48 years later. Compounded annually it would
be worth $16,393.87. Compounded monthly it would be worth 17,686.89, over $1000 more.
Rule Of 72
The amazing thing about the compounding example is not that there was a slight difference
between monthly and yearly compounding amount. The amazing thing is that in 48 years
the amount grew by over 16 times. We don't need a calculator to know much a fixed sum of
money will grow at different interest rates. There is a rule of thumb that can tell us called
the rule of 72. A fixed sum of compounded money grows approximately by the following
geometric progression. 2, 4, 8, 16, 32, 64, 128, 256, times and so on. You can see that
each number is the previous number multiplied by 2. If you divide 72 by the interest rate it
tells you how long in years the doubling period is. Dividing 72 by 6% give a 12 year
doubling period. That's four times in 48 years which gives the approximate value of
$16,000. That is pretty close to the actual calculated values in the previous  paragraph.
Unbelievable Results!
If you divide 72 by 12% you get a six year doubling period. In 48 years your money
doubles 8 times to grow to an amazing $256,000. You saw previously that 6% gives you
$16,000. 72 divided by 3% gives a 24 year doubling period. Your money only doubles
twice in 48 years to grow to a  measly $4000. It's hard to believe that $1000 dollars can
become a quarter million dollars in less than a life time. If a parent had invested it for their
child the day they were born in something returning 12%, they would only be 48. If
someone had invested it at that rate in their twenties, they would have their quarter million
by age 68.  
So if you invest:
$1000 dollars at 3% interest in 48 years becomes $4000.
$1000 dollars at 6% interest in 48 years becomes $16,000.
$1000 dollars at 12% interest in 48 years becomes $256,000.
Getting 12%!
Are there places to get 12% return on an investment? Over the short term no.  But, with all
the ups and downs in the economy, including the great depression and the many
recessions, over a fifty year period there are investments that have returned 12% or
better.
Honest financial people have to tell you that past performance is no
guarantee of future performance. In other words, history may not repeat itself.

Maybe fifty years from now, governments will collapse and there will be no viable economic
future. Maybe the world will end from global warming or be hit by an asteroid. We have to
trust that there will be a future and the economy will grow. One thing is certain. If you don't
save you will die broke. Second, Most people waste many $1000 in their life times. Why not
put a few of those $1000's to work for your future.
Wasting Time!
I will be showing you where you will have a shot at those higher rates of return. I can't give
you more time. Time is a key component of this wealth building formula. I'm hoping this
valuable information reaches those young enough to benefit from it .If you are in your
twenties, great! But don't forget people are living longer today. If you are forty, you could
live to be eighty or ninety. That's forty to fifty years. I will be showing you other ways to get
money that don't require as much time but don't waste this opportunity. Time is precious.
Use it or lose it. Start saving now.
©2004 - 2005
Financial Independence