Investing: Literally Purchasing Money With the Magic of Compound Interest

There’s a misnomer that the only way to be good with money is by spending less. While it’s true that many people who are financially successful are frugal, it’s not the only way. Frugality and spending less is a tool, but it’s not the only tool.

In this blog post, I am going to introduce to you what might seem like an unusual concept. And that concept is that I love to spend. Yes, I love to spend!

I’m not the stereotypical spender though. I don’t like to buy a lot of material goods or “stuff.” Sure, I like nice things, but I’m very selective in what I purchase, and how often. I don’t know if I’m officially a minimalist, but I’m pretty close.

What I love to spend on is investments. I like to spend as much money as possible in this area. The reason I enjoy spending so much in investments is that you can literally buy money with the magic of compound interest. I think of investing as using the money I have today to purchase more money in the future.

It’s important to note that you’re not investing just for the sake of compounding dollar after dollar, and hoarding as much money as possible. You’re investing to obtain financial freedom as written in this blog post.

Back to the concept of purchasing money via investing. Imagine if someone trustworthy walked up to you today and told you that if you gave them one hundred dollars right now, they would come back to you in ten years and give you $259. They would come straight to your door and give you the whole amount in cash. You wouldn’t even need to go anywhere to get the money. Would you do it?

What I just described is investing. $100 compounded at a 10 percent rate of return over 10 years is $259. You are literally purchasing money. The only catch is that you have to wait 10 years to get the money. And if you wait additional years, it only gets better.

$100 compounded at a 10 percent rate of return over 20 years nets you $673. That same $100 compounded over 30 years at a 10 percent rate of return will give you $1,745. Wait 35 years and you’ve got $2,810.

This is where investing gets really fun. $100 is just a nice round number to show the power of compounding. In reality, you are going to be investing a lot more money than that. Instead of $100, let’s use a much larger round number: $100,000.

Invest $100,000 and in 30 years you’ll have $1,744,940 using the same 10 percent rate of return. Invest for 35 years and you’ll have $2,810,244. That’s truly life changing money. It’s very powerful to know you have the ability to purchase over 2.7 million dollars!

I can already hear what some people are saying. How are you going to get $100,000 in the first place? That money doesn’t just magically appear for you to invest. And someone making this point would be absolutely correct. You have to work your way up to it. You get to $100,000 by starting now.

Investing $1,000 per month for 6 years at a 10 percent rate of return will get you over $100,000. So will $500 per month for 10 years at 10 percent. $300 per month for a little over 13 years at a 10 percent rate of return will also get you there. Point is, there are countless ways to reach your financial goals.

Back to the point of this blog—spending on investments to literally purchase future money. In the Richest Man in Babylon, George Clason writes, “Every gold piece is to work for you. Every copper it earns is its child that can also earn for you. If you would become wealthy, then what you save must earn, and its children must earn…”

This is what investing does for you. You contribute your own capital, then your capital goes to work for you to earn money. But that’s not the end of it. The money your original capital earned also goes to work for you to earn money.  The money that earns then goes to work for you.

To put it in simpler terms:

• You go to work to earn money
• You contribute the money you earn at work into an investment
• Your investment makes money
• The money your investment makes also earns money
• The money that money makes also earns money
• The cycle continues, allowing your money to compound at an almost unbelievable rate

All this money is working for you. It’s not just the money you’re earning at work anymore. It’s an almost infinite cycle of prosperity that you created just by investing. That’s what investing can do for you, and why I love to spend my money on investments.

How do you think about investing?