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Member
In short he is saying a pint of beer actually costs $20
Sometimes compounding is to powerful for me...
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Originally Posted by KW
Called the opportunity cost of money - if you spend it today, what is the real price you are paying? If I spend $1000 on something, as opposed to investing the money, in 10 years time that item would have cost me $10,000 (note, example only as I cant be bothered doing the real math). If you can think this way, you can better manage your money to only buy what you really need, as opposed to every piece of crap that is made in China and lasts for 12 months. It changes your shopping habits, and allows you to save money without really feeling the sacrifice because you no longer want to buy that item because its 'not worth it'. Money has more value to you for investment than it does for spending. Thats how I feel about it anyway.
Interestingly, people have no problems assigning the same rationale to house purchases, ie. its going to cost me $500k now but in 10 years it will be worth $1mil. Boy what a bargain. Although they do seem to forget that the interest and repayments on the $450k mortgage are going to amount to $900k in the same time frame, making their actual gain not $500k but $50k (still no real math).
Forget the interest you pay to buy the house. That $50000 you used for the deposit compounded over 30 years at say 15% equals $3.31million.
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Originally Posted by KW
Hey, do you have a website that calculates compounding interest - its not the first time I've needed to figure out the future value of stuff. Preferably one that takes into account monthly payments.
Google is your friend. search 'compound interest table's and you'll find dozens to pick from. Also use the rule of 72, it takes two seconds to learn, and you can carry heaps around in your swede for instant maths.
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Member
I know we are just throwing around examples
But 15% for 30 years is close on Warren Buffet rates. Aim for half of that and you would do well.
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Originally Posted by belgarion
Forget that site - too complicated. Rule of 72 simply says the % yield divided into 72 gives the number of years for investment to double. e.g. An 8% return will double the principal in 9 years. (8x9 =72).
To double money in 15 years you need a yield of 4.8%. (72 divided by 15 = 4.8)
Not deadly accurate, but near enough.
Last edited by fungus pudding; 06-01-2012 at 02:35 PM.
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