Like any other beginner investor, I often wonder how much good I am doing by investing. I know it’s an important thing to do, but I can’t help but wonder how much good is actually being done. I mean, will it really even matter that much? Will I be able to retire on the amount that I have accumulated?
As it turns out, I recently wrote a post about how long it would take to build up passive income. In the post, I calculated how much of a nest egg I would need to generate $8,000 per month. To many people, including myself, that is a lot of money. Few people probably ever achieve that kind of passive income. Yet, what I learned was actually encouraging.
How Is It Possible to Accumulate So Much Wealth?
When investing your money, it may not seem possible to save up 1 or 2 million dollars in your lifetime.
That’s a whole lot of money where I come from! How the heck am I ever going to have that much money?
I know that these are some of the thoughts that first raced through my head. A thousand dollars here or there invested doesn’t seem like a lot, but it slowly adds up. Here’s why:
The reason why you can save up more than you could imagine is that you are constantly earning interest on your investment. If you have $10,000 invested and you acquire a 10% return on that investment, the next year you will have $11,000 plus whatever else you have invested. Once you have a large enough sum of money, the 10% gives you more money each year. $100,000 generates $10,000 on a 10% return and so on.
The Secret to Accumulating Wealth Faster Than Others
The secret to accumulating wealth faster and earlier than others is actually no secret at all. It means sacrificing when you are young and investing early. Not only investing early, but being aggressive when you are young. While it may be hard to invest more money when you don’t make as much money now, it will ultimately mean financial independence much earlier.
If you are looking forward to early retirement or building up a large nest egg off of which you can live, being aggressive is the only way to do it.