Who says money doesn't grow on trees? That's one of the biggest lies ever told. Money does in fact, grow on trees. The key is in knowing how to plant and grow one. Would you like to have your own money tree? There are three essential ingredients you need in order to grow one of your own. Those ingredients are saving, investing, and time.
Saving: Savings are the seeds of wealth. Those seeds are generated by spending less than you make. For example, if a 25 year old could save/not spend just $286.00 per month, every month, for 40 years, at the end of those 40 years he would have saved $137,000. (seeds) Savings seeds alone are not enough. You need some leverage in the form of fertile soil to make those seeds grow when planted.
Investing: Investing is like planting. It provides the soil nutrients, and water needed to turn savings (seeds) into wealth building seedlings capable of achieving amazing growth over time. For example, suppose instead of just saving $286 per month our 25 year old decided to invest those savings seeds into a mutual with an average annual return of 8 percent. At the end of the first year our 25 year old would have $3,432.00 in savings plus an additional $128.67 of investment growth for a total of $3,560.67. Prudent investing is the same as planting seeds in fertile soil. Although I can see green shoots peaking above the ground already, it isn't a money tree - yet.
Time: Finally, time the great multiplier, provides the sunshine exposure you need to stimulate and sustain growth at an increasing rate over time. If our 25 year old can keep those savings seeds of $286.00 flowing into the fertile investment soil of an 8 percent return for 40 years, he will have $1 million. That $1 million is made of $137,000 in savings plus $863,000 of growth caused by investing in the fertile soil of an 8 percent return over time.
That's how money trees are made. That's how wealth is built. It's really a synthesis of saving, investing, and time.
Now that we have built our money tree, will it bear fruit? A $1million money tree, if invested at 4 percent, will generate $40,000 in annual income forever. How's that for bearing fruit? It is a money tree! It's also a nice way to help pay for retirement.
Saving, Investing, and Time, the three essential ingredients for building wealth. Get started on your money tree today.