Compound your interest (not your financial problems!)

They say that compound interest is the eighth wonder of the world. (OK, so the “they” is usually finance nerds who also think double beige is a fashion statement).

So what is it? It just means that the earnings on an investment, like cash or shares, rather than being withdrawn, are re-invested and keep adding to the earnings in the future. Over time, this can lead to exponential growth of the asset.

So, the key factor in letting compound interest work its magic is time: the sooner you start and the longer you allow it to run, the better off you are likely to be.

Yes, life can be a swirling maelstrom of must-do’s ranging from work pressures, grocery shopping, school pickups, paying bills and lice infestations. But that’s all in the here-and-now, and if that’s all you do, your financial here-and-now of today is more likely to be the same in the future. That’s because if you keep doing what you’ve been doing, you’ll keep getting what you’ve been getting.

So, how to have a circuit breaker, take stock of where you are and where you want to be? Well, firstly it means clearing space in the here-and-now to invest in a better there-and-then. But it needn’t be much, say a couple of hours to start.

You don’t need to know about complex financial strategies or the fine details of tax law. Just start with what you already know about your finances:

· Income and expenses

· Assets and liabilities

That’s the here-and-now. And then start drafting a story of where you want your financial future to be. That’s the there-and-then.

And put it on paper, (or more likely on a screen), because that helps to pin down your current reality and give you a “true north” vision of the future. And that’s important because it starts your forward momentum, can galvanise you into action and ‘screws your courage to the sticking place’.

That sense of motivation can then drive you to create strategies and action plans to go about putting in place the financial architecture you’ll need to meet your objectives. That’s where more research or consulting a professional for advice or guidance may come in.

And it’s that action you take now that stops time being frittered away and rather allows it to be the fuel that powers the engine of compound interest. You don’t need spells or a wand to conjure up its magic. You just need to make a decision to start.

And where can you start? One way is to use financial plan templates to help organise your journey. You can get them free by emailing:

info@themoneymatrix.com