How to become economically independent – You want to act like you are independently wealthy. Open a savings account. If you work for your income then take 10% of each paycheck and put it into the account. This is very important: when the account makes interest put the interest into the account. Of course never take funds from the account and never spend the interest it makes.
Here is an example: Suppose you make $100 per week, and you have a savings instrument that pays 10% per year compounded weekly. Suppose also that you place 10% of your income into this account each week. If you start this at age 20 then at age 60 you will have $277,621.91 in the account, and at age 70 you will have $762,851.73 .
You may well say, “That is great but I am not 20 anymore, and now I am unable to create the wealth before I die”. That depends on how long you wait. If you are say 30 you can still achieve this. Note that from the spread sheet at the end of 10 years, the 20 year old would then be 30 years old and have $8,921.50 in the account. If you could at age 30 have that amount in the account by any method you could be in the exact same place as if you had started at age 20. Perhaps by now you are making more than the $100 a week made by the 20 year old. That should allow you to put 10% of your current income into the account and catch up.
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'Tesco's has already turned around many of the T&S convenience stores they bought a year ago... 80 of the 450 outlets have been revamped as Tesco express stores... average sales are up by 80 percent' The Gaur dian 26/121/03 GearingTeso's 0. 25: 1 Sainsbury's 0. 16: 1 M&s 0. 28: 1 o Gearing is a measure of risk when investing in a company Proportion of capital made up of fixed interest ...
But don’t wait too long. Notice in the example above the gain from age 60 to age 70 is $485,229.82. Not bad for 10 years. However the gain from age 30 to age 40 is from $8,921.50 to $33,149.37 or an increase of $24,227.87. Again not too shabby for 10 years but nothing like the $nearly half a million from age 60 to 70. Why the big difference? It is because of the compounding interest. Then again what good is half a million at age 70? Well that is a different question, perhaps to be addressed elsewhere.
You might also point out that savings accounts don’t make 10% a year but are designed as a hedge against inflation and maybe only make 2 or 3%. True, but after a while you will have $1,000 or maybe $5,ooo in that savings account. At that point you can move that wealth to an investment instrument, say with a reputable money management company, such as Edward Jones. Over the long term such investments can make 10% or more per year.
The spreadsheet that directly computes these values for each week, … sorry I am unable o include i in this context. Those of you familiar with sprad sheets can probably create one such for yourself.
By the away, if this account is allowed to continue for 100 years it would be worth $113,437,773.17 . Certainly some assumptions have been made here. Taxes on the account have been neglected. The 10% a year is assumed to be over the long term, as any investment instrument varies in it’s returns in response to the economy. This kind of growth in the world’s resources can not continue indefinitely. It is after all only an example to illustrate one way to have quite a bit of income down the lines. Even if you only have $10,000 you can make $1,000 a year at a 10% return. That is $833.33 a month, and as I writ this in 2005, that amount is significant.
Concerning loans – A business loan has to be paid back with interest. If you take out a business loan expect to have to pay the interest. If you offer another a out a business loan then require the interest.
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Fromme, K. Wetherill, R.R., &Neal, D.J. (2010). Turning 21 and the Associated Changes in Drinking and Driving After Among College Students. Journal of American College Health, 59(1), 21-27. The author’s main arguments in this article are examining the idea of drinking and driving before and after turning twenty-one. Participants were drawn from first year college students and examined for four ...
Here is why: Money depreciates in value over time by am amount referred to as inflation. Suppose you loan someone $1,000 for a year and they give you the $1,000 back at the end of the year. If the inflation for that year is 3%, then you only received back wealth in value of the original amount less 3%, or in this case $970.
If you are loaning to a relative or friend that is not a business loan. It should be a gift with no interest and no expectation of it being paid back. If you can not afford to do that then do now loan the money.
Here is why: Suppose I loan my daughter $1,000 for a year with the agreement that she would pay me back at the end of the year because I needed it to pay my taxes. Now suppose that at the end of the year she is unable to pay me back. What am I to do? Should I take her to court? Should I have a fight with her? Should I have a conversation with her about what she is going to do? Certainly the latter, as she is out of integrity. But she doesn’t have the $1,000 so it is conceivable that there is nothing I can do to get the money. Enacting either of the first two actions is sure to cause problems. Now I must take out a loan to pay my taxes. In truth I couldn’t afford the gift in the first place so I should not have called it a loan. On the other hand, if this person is not closely related to me then I can certainly take them to court and seek redress without concern that doing so will cause a problem between us.
and suppose she can not If for some reason your relative or friend is unable or unwilling to pay it back and you can’t afford to loose it then you are in big trouble. You just don’t want to put yourself in that situation.
Concerning gifts – see above.
