IMG Thread

[makie]

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Part 3 of 3

The Power of Compounding Interest and Rule of 72



Interest is one of the secrets in making money grow. Compound interest is a concept wherein both the capital and interest grows making its growth rate faster compared to simple interest (wherein only the capital grows). Compound interest can work for your favor or against you. If it's applied on savings and investments, it's working on your favor but if its applied on debt, it's working against you.

The rule of 72 suggests how long will your money double in reference to the interest rate. The higher rate, the faster doubling of your money. The interest will simply be divided to 72 and that's the number of years for your money to double.

At 4%, 72 divided by 4 is 18 so that means your money will double every 18 years.
At 8%, 72 divided by 8 is 9 so your money will double every 9 years.
At 12%, 72 divided by 12 is 6 so your money doubles every 6 years.

If given the chance, people will invest at either 8%, 12%, or even any interest higher than that but because people are so cautious or simply lack the knowledge on where to find these interest rates, they settle for 4% or even lesser than that hampering the growth of their money.

Banks are into lending or they simply reinvest the depositors money so what normally happens is that the money that is being deposited at 4% is simply being lent at 12% or reinvested at a higher yielding interest rate. After 36 years, the depositors money is returned. The bank made the P100T grow to P6.4M after 36 years and gave the depositor only P400T (because that is the interest rate that they have agreed). Unfortunately, most people are contented with small interest rates because that's what they only know or they became too cautious.

Normally, banks only give 1% for savings accounts. A bulk of many people's money are in savings accounts. That means, it will take 72 years for their money to double its value.

Put your emergency fund in the bank for easy access.
Put your investments into something that yields higher interest rates such as mutual funds, stocks, bonds, balanced funds, UITFs, etc. for better growth.

[lorenzoleo]

The system is awesome, It is an agency-creating machine.

[makie]

The distorted view about rich and wealthy people: He who spends more is rich. He who spends the most is the richest.

Funny as it may seem but this is how most people categorize who is rich and who is richer. This is their perception of wealthy people. The result? Because they want to be rich, they strive so hard to earn money and because of their wrong perception about wealth and being wealthy, they end up spending everything that they have earned. At the end of the day, they either have nothing left, continue to struggle to make ends meet, or doesn't have the choice but to keep on working and finding an income because they haven't saved anything at all.

He who saves the most, not spend, is rich and he who saves the most is the richest. Take this for example:

Person A and B both earn P100,000 a month. However, person A's lifestyle is worth P90,000 a month while person B's lifestyle is worth for only P80,000 a month. That means person A spends P90,000 a month while person B spends P80,000 a month on both needs and wants. Who do you think is richer? Some people would say that both are the same because both are earning the same amount every month while some would even say that person A is richer because he can afford to spend P50,000 a month. The answer is that person B is richer because he gets to save P20,000 a month, P10,000 more than person A.

However, here comes person C who is only earning P50,000 a month. But unlike persons A and B, person C only spends P20,000 a month. He disciplines himself in spending because he knows the value of saving.

Among those three, who do you think is the richest? Are persons A and B the same because they both earn the same amount? Or person A because he spends more? Despite only earning P50,000 a month, person C is the richest among the three because he gets to save the most.

Being rich is not all about how much you earn but on how much can you save and invest.

Another example. Assuming that persons A, B, and C all have P1,000,000 but person's A lifestyle is worth P200,000 a month, person B's lifestyle is worth P100,000 a month, while person C's lifestyle is only worth P20,000 a month. Most people would prefer persons A and B because they spend too much. They enjoy spending. However, person A's million can only support him for 5 months, person B's million can only support him for 10 months while person C's million can support him for 50 months. Again, being rich is not about how much you earn and how much can you afford to spend, it's on how much can you save.

Wealth formula:

Income = Savings (20%) + Tithes (10%) + Expenses (70%)

*If you're not religious, you can remove tithes and make your savings 30%. However, if you believe that the more you give, the more blessing would come to you, then you should give tithes.

Savings should come first before expenses. You should pay yourself first. If you prioritize your expenses, chances are, there'd be nothing left for you. You'll always have unlimited reasons to spend so before it comes, better save so you can safe keep your money.

Keep this in mind: If you don't have any plans for your money, other people are planning to take your money away from you. Proof? Department stores, malls, fast food chains, etc. are very successful in their marketing strategies and earn millions of income from the people's pockets. There is a difference from spending with discipline from spending recklessly.

[lodyl]

Matsalams kaayo ani imohang mga posts bai Makie... inspiring jud kaayo....

[portal]

Ohhhh we have those teaching's sa amo MLM in one of our Financial Intelligence Training

[roblou]

thanks for this thread AmorsoloX.

it's really true guys, i've never paid a single cent for AmorsoloX to start this thread. he is the one who is eager to learn about our company, IMG.

just got one clarification:

our main product is "financial education" or "financial literacy" or whatever u call it. the insurance and investment products are just our by-products. in IMG we are more concern in teaching people proper financial knowledge than just selling them insurances and investments...

... because we believe in this: MISSION first before COMMISSION.

so to all of you guys who wanted to know more about our company, pls feel free to pm me anytime.

happy posting!!!

sir PM unta ko nimo pero dili naman ka maka receive puno na siguro imo inbox..diri nalang ko mangutana nimo..kinsa man atong duolon diha sa IMG kanang maka pasabot jud nato bahin aning ilang investment product like mutual fund..ganahan ko mo invest ani pero kulang man gud akong nahibal.an bahin aning mutual fund..pm lang nako sir or sa akong email add: rl_abaquita@yahoo.com!

[makie]

sir PM unta ko nimo pero dili naman ka maka receive puno na siguro imo inbox..diri nalang ko mangutana nimo..kinsa man atong duolon diha sa IMG kanang maka pasabot jud nato bahin aning ilang investment product like mutual fund..ganahan ko mo invest ani pero kulang man gud akong nahibal.an bahin aning mutual fund..pm lang nako sir or sa akong email add: rl_abaquita@yahoo.com!

Sent you a PM.

[makie]

Ohhhh we have those teaching's sa amo MLM in one of our Financial Intelligence Training

It's good that your company has one.

[Ryan Tan Yu]

Hi Sir Makie,

Good evening. I've heard about and taken a seminar in your IMG office in Lahug, although the contents of the seminar didn't cover what I expected. I'm particularly interested in financial investment. If we can skip the insurance part, can you briefly explain how much I should invest to get 10k (in interest) within the first 2 months?

[makie]

Hi Sir Makie,

Good evening. I've heard about and taken a seminar in your IMG office in Lahug, although the contents of the seminar didn't cover what I expected. I'm particularly interested in financial investment. If we can skip the insurance part, can you briefly explain how much I should invest to get 10k (in interest) within the first 2 months?

2 months is a very short period of time and with that kind of time frame, we don't encourage people to invest. As we know, investments take time to grow. But let me just give you an overview about what investments IMG offer:

Mutual funds - Mutual funds is all about owning shares of different companies or in short, its all about ownership. If you buy mutual fund shares, the mutual fund company will give you shares and your money will be invested in different companies. The growth of the company is the growth of your money. FAMI and PhilEquity, two of IMG's mutual fund partners has gone up by more than 15% in just the first quarter of 2012. Mutual funds is ideal for long term, maybe at least 5 years. 2 months is too risky for mutual funds because of the unpredictability and volatility of the market. Right now, the tension between China and the Philippines is high. That for sure will affect mutual funds.

Real estate - The demand for properties is high and its value for sure will increase in years to come. However, real estate still will require time to reach its highest potential. Real estate will require a large amount of capital but the returns are large as well. IMG's real estate partners are Ayala Land, DMCI Homes, and Vista Land. P10T in 2 months is actually achievable in real estate, actually even more than that. Buy during pre-selling and sell it when the construction starts. It's price/value will increase. But there'd be a lot of paper works and capital involved.

If what you aim is a steady flow of P10T a month in just after 2 months, it would be so hard. It's possible but I won't give any guarantees because the economy is very volatile and it affects investments. Time is very important in investments.

But if you aim to plan for your retirement or any other long term financial goals, then maybe we can help you out with that.