Well, unfortunately for the inventory, he didn’t understand the power and paid for it with his life. Here’s how the story goes …
“The Emperor of China was so excited about the game of chess that he offered the inventor one wish. The inventor replied that he wanted one grain of rice on the first square of the chessboard, two grains on the second square, four on the third and so on through the 64th square. The unwitting emperor immediately agrees to the seemingly modest request. But two to the 64th power is 18 million trillion grains of rice — more than enough to cover the entire surface of the earth. The clever inventor did not gain all the rice in China; he lost his head.”
- Recently recounted by George Gilder
Don’t lose your head, too!
Understand the concepts of compound interest and you’ll not only keep your head, you’ll be financially set for the rest of your life. Let’s take a seriousStop Sitting on Your Assets look at compound interest and it’s affect on your finances.
The spectacular wealth achieved over time using the H.E.R.O.. Solution™ plan is made possible by the application of two basic, yet different mathematical principles of finance. The extreme success of this method lies in using “other people’s money” (OPM) based on simple interest and investing this cash acquired, or lending it out, using compound interest.
With simple interest, the amount charged for borrowing is only calculated on the capital owed in that month. Should another month go by, the amount of interest charged in that month is only calculated on the outstanding loan balance remaining.
When you borrow mortgage money, your balance remains the same using an interest-only loan or it declines with an amortized loan.
Why is compound interest such a crucial factor?
Compound interest is interest paid on interest. It is exponentially more profitable to receive compound interest, if you are the one lending out the money or, in other words, investing it.
Real Wealth L.A.W.™, which is talked about in lesson 12 and in Stop Sitting on Your Assets, should be applied to your choice every time you make the decision on where to put your critical cash. If each must pass these tests, which investment and savings vehicles out there would:
- Lock-In your principal,
- leave your funds Accessible and
- keep your assets Working?
To learn more about Real Wealth L.A.W. and how to keep your critical cash growing and protected, read Stop Sitting on Your Assets.
There you’ll not only find proven step by step wealth building strategies, you’ll find interesting and helpful facts about how the government taxes and how you can position yourself to make the most of these tax laws.
Did you realize that traditional wisdom would have you work for up to 5 weeks every year for free! (And it’s not donating your time to charity.) Find out about this travesty in the next lesson to come.