Everyone knows Albert Einstein, the mathematical genius. Many also know Yoda, the Jedi Master from Star Wars. Many do not know that Yoda is based on Einstein. Both legends know everything about 'The Force'. The one for supernatural super powers, the other to make a lot of money from little money.
'Use The Force' is the only thing you have to do to become a millionaire. Einstein then talked about the power of compound interest:
"Compound interest is the most powerful Force in the Universe. The Eighth Wonder of the World. He who understands it, earns it. He who does not pays it. "
The men who manage the power of compound interest to perfection are Charlie Munger and Warren Buffett of Berkshire Hathaway. Both gentlemen were just like you and me not rich when they were young. Now they are billionaire and belong to the richest people in the world. All thanks to the power of compound interest.
The power of compound interest is phenomenal
We can hardly imagine how powerful compound interest really is. To illustrate this, you can start with 1 euro cent. When you double that euro cent every day in value, then you have after 1 month ... more than 10 million euro (!).
This sounds unlikely, but it's true ...
So on day 31 this will be 10,737,418.
Of course it is not possible to double your money every day. This is where the disadvantage of compound interest rises above water. It needs time. On the Warren Buffett chart, it is also clear that his wealth only started to rise soon after his 60th.
But with 5 euros per day you also come to an end. If you pay 5 euros per day - or 1.825 euros per year - at 10% per year, you will have 2.5 million euros after 50 years.
Almost everyone can spend 5 euros a day to invest in the stock market. The stock market generates about 10% per year on average over a long period.
Getting rich is therefore a matter of making choices. Do you spend 5 euros a day on coffee, lunch, clothing, gadgets, ... or do you want to spend 5 euros a day on the power of compound interest and become a millionaire?