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Dr. Kalinda Rose Stevenson
What Are Sources Of Money To Build Your Wealth?
Welcome back!
More money is the result of three types of factors:
time, energy, and money.
In other words, if you want to build wealth, by amassing
more money, you will need to invest time or energy or money,
or some combination of time, energy, and money to create
more money.
Of all the ways you can use your own money to build wealth,
the slowest method of all is to save your money in an
interest-bearing savings account. This method uses time and
money more than your own energy.
As a method to create wealth, the great disadvantage of this
method is time. It will take a long time to amass a sum of
money this way.
“The Rule of 72″ is a simplified way to determine how long
it will take to double your money, based on a fixed rate of
interest.
When you divide 72 by the rate of interest, you get a rough
estimate of how long it will take for the initial investment
to double itself.
Let’s say you deposit $100 in a savings account at a fixed
rate of interest of 5%.
We’ll divide 72 by 5 (72 / 5 = 14.4)
This means it would take 14.4 years for your $100 to double
to $200.
These days, 5% is high for an ordinary savings account.
What happens if you get only 2% interest on your money?
We’ll divide 72 by 2 (72 / 2 = 36)
Now it will take you 36 years to turn your $100 into $200.
Yet $200 in 36 years is not going to be worth $200 right
now, because of the Time Value of money.
The essential concept of the Time Value of money is that any
amount of money is worth more now than it will be later.
Inflation continues to eat away at the value of your money,
so that $200 in 36 years will be worth far less than $200 in
current value.
As a method to create wealth, investing your own money in an
interest-bearing savings account is a very slow road to
wealth, in which the real value of your money decreases even
as the dollar value increases.
By Kalinda Rose Stevenson, Ph.D.
Author of No Money Limits For Real Estate Investors
WINNER
National Best Books 2007 Awards
Business: Real Estate Category
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