5 Benefits of Compounding

 Every one wants to become rich. For this, they uses hard work options. They do hard work in jobs whether self employed job or doing the job any other place. But their desires consume their all money. They becomes only poor. Then start to do more hard work by doing extra job or part time business by investing more time. Which makes their health so bad. They utilize the time of their relax body in doing hard work. With this, they pay more on health than extra earning from investing extra time. 

it means, it is not best way. Best way is to take the benefits from Compounding which if you learn and use in your business or work, you will rich in small time and without using extra time efforts for becoming rich. Compounding means using the compound interest for increasing your wealth fastly instead using of simple interest. Compound interest is interest on the value of interest. 

Now, come to learn 5 benefits of Compounding which will make you rich. 

1. If you have very small amount and if you are getting high return %  and reinvest same rate for Few Years, it will grow unlimited and more than  you imagination

See following image 

In above image, Mr. A invest Rs. 100 every year with simple interest for 10 years and Mr. B invest for 10 years with compound interest

After 10 years A will get only Rs. 11000 and Mr. B will get Rs. 102400

Now, both have less amount just Rs. 100 and both are getting rate of return 100% for 10 years but Mr. A gets only 11000 in the end of 10 year and Mr. B gets Rs. 102,400 which is about 1000 times of his initial investment and 10 times from total investment. 

What happened. Mr. B did not consume interest and make the interest as principal for next year investment. After this, his interest grow double and with just 100 investment, he got Rs. 102,400

Mr. A invest and gets simple interest at the end of year and he did not re-invest for getting compounding benefits. So, get only Rs. 11000

Now see following image how you jump richness with compounding power

2. If you have started to grow investment and if you are getting high return %  and reinvest same rate for Few Years, it will grow with growth of your investment

Yes, this point is great to understand.

in compounding

End amount will be

A = P ( 1+r/100)^t

This is simple formula

A = end amount including compound interest 

P = Principal amount or initial amount

r= rate of interest

t = time

If you grow your P, growth of A will same time. 

Now suppose you invest only Rs. 10000 per year with same return 100 %  per year for 10 years. 

At the end of 10 years, you will get Rs. 10240000 or Rs. 1 Crore and 2 Lakh and 40,000 with total investment of Rs. 1,00,000

It means, you know understand that you never make small your interest and consume it, you reinvest in same business where giving you high return upto lakhs and it will convert in crores of Rs.

You grow  two zeros in your principal and your total amount will grow with same two zero but you understand, you convert your final fund from lack to crores.

3. If you have very small amount loan and if you are paying small compound interest and within Few years, it will make you Bankrupt

This is also 2nd benefit of compounding which can help to repay fast loan and protect your wealth because if you have taken small loan and paying small compound interest rate, it will become big amount which you will pay in total amount. With this, you understand and promise yourself never take loan.

For example, you have taken Rs. 100 loan per year with the promise to pay interest compound 8.3% pm ( never become fool, it is equal to 100% of per year). Now, this total loan amount including your principal you will pay is again Rs. 102400 and principal loan is just Rs. 1000 but compound interest is 

102400 - 1000 = 101400

It means 100 times more, you have paid interest. 

So, never take loan

whether it is personal loan or credit car loan or pay later loan from online companies

4. Money will Start Work for You and Earn For You

This is great benefit of compounding. If you understand day one compound interest and its effect on your final amount, you can fastly free from job and self employed rat race. 

How will money will start work for you and earn fast for you with compounding, we have to learn

A = P ( 1+r/100)^t

you understood it simply.

1st factor

For investment, you need the principal. For getting principal, you must need

1. To do any part time job or full time job. So, you will get salary. For good job, you need higher education

2. To do any self employed business like CA, Doctor or Advocate or singer. For this, you also must learned specific skills.

3. Doing Business and getting earning from it. Yes, again updating knowledge

It is possible if you learn and invest monthly or yearly as principal amount

2nd factor : Investment time

Second is commitment not to withdraw principal and interest for 10 to 15 years. 

3rd Factor : Rate of Return

Third is rate of return. It needs business and financial knowledge. Yes, there are lots of business which gives you double in 5 years. Tripple in 5 years and 5 times in 5 years means every year, your amount will double. 

All 3 in your control and your growth money will unlimited. Now, you can pay your employees. You can do your business with your money and money will start work with you and earn for you. Before this, about 3 factors, you have to focus. 

5. Compounding Transform Your Life 

When you learn the secrete of the power of compounding your life transform. Following changes will come.

1. You will start to control your expenses 

You never spend more than your active earning. You will save every month because you know that with compound interest, next 10 years, you need to do job and your invested compound interest per month will equal to year 1 year salary. 

2. You Never Withdraw your interest upto become 100000 growth of your interest, you will reinvest your interest. If you withdraw every year your earned interest, you limit your life with simple interest instead compound interest. 

3. You make the simple life style. There will not ac but cooler in your office. There is no car but only bike or cycle in your hand. You keep only normal clothes. But it only for 10 to 15 years. After this, you got everything what you want in your life. 

4. With its understanding and using, you will become all good habits. For increasing your investment, you learn daily new skills and increase your active earning ability. You protect your business losses for protecting your future earning.