Compound Interest

According to Wikipedia,compound interest is the concept of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on.

In other word,earning additional interest on interest. Once you earn your first interest payment, it is added into the principal. It will allow your money to earn even more money over time. It is the most common type of payment you will earn by lending your money to a bank.

For example,say you had invested $1,000 today in a 5% savings account. You will have $1,050 after one year. However, in year two, that same initial investment would be worth $1,102.50. And in year three, the same $1,000 would be worth $1,157.63.After 10 years, the initial $1,000 investment would be worth $1,628.90 and after 20 years, it would be worth $2,653.30.What if by year 50,it woud be worth $1,1467.40.

This second example shows how the compounding effect can work against you.
Let say you want to borrow $5000.00 to purchase a used car. You want to be able find out how much the carry will cost you if you borrows the $5000.00 at an interest rate of 8% for 4 years. The amount that you actually paying for your $5000.00 is $6802.44.Thus,the total amount of interest you will be charged for borrowing the $5000.00 is $1802.44.

Can you the the the power of compound interest now??

Ways to Save Money

Being able to successfully save money is one the most important things that you can do in order to prepare for your financial future.Here are some money saving tips.I have listed some money-saving tips:

Ways to Save Money:

* Make more money online.
* Don't ever spend money just because you have it.
* Find a hobby that you can earn money doing.
* Stop smoking.
* Look critically at how you spend and save your money.
* Learn how to manage your finances by reading financial publications.
* Increase the money you earn (part time job, promotion, through invesment,saving,etc.)
* Take public transport to work or car-pooling.
* Be patient.
* Start saving money today!
* Don't give up!
* Cook at home instead of eating outside.
* Spend less money than you earn.
* Find ways to make more money.
* Create a financial budget to help you save.
* Do not use credit cards.
* If you do use credit cards, pay them down in full each month.
* If you have a lot of credit card debt at high rates, look into consolidating your debt.
* Lower your student loan payments..
* Stop purchasing unnecessary items.
* Refinance your mortgage or debt at a lower rate.
* Refinance your car loan at a lower interest rate.
* Find cheaper insurance rates.
* Lower your phone bill.
* Don't buy anything just because it is on sale.
* Reward yourself for saving money.
* Drive used cars.
* Look for a higher paying job.
* Reduce your auto insurance.
* Don't eat out as much as you'd like to.
* Invest the money you save so that it earns money too.
* Try to spend more time at home.
* Sell your junks.
* Borrow books from library books,don't buy.

Remember, "A Penny Saved is A Penny Earned".Every step you take to save money helps!

Start Saving Today

It is so important to start saving and investing today.

To understand why a dollar saved today is worth so much more than a dollar saved tomorrow,you have to take a look at the time value of money rule for a description.And start saving money today!

The time value of money states that a dollar today is worth more than a dollar at some time in the future.It's not that simple to understand at first glance,so let me show you some financial examples:

If you invest $2,000 in a 6% savings account today, it will be worth $2,120 in one year. Therefore, if you can have $2,000 today or choose to have $2,000 one year from now, it is always better to have the money now. By saving and investing today, you make the time value of money work for you.

Let’s look at the reverse of this, to see how the time value of money can work against you. Suppose instead of receiving $2,000 that you spent $2,000 by purchasing merchandise on your credit card. Remember that a dollar today is worth more than a dollar tomorrow, so in this case, you will have lost money because you will need to pay off your debt with money from the future (which is worth less than money today). In addition to having to pay with future money, you will also have to pay interest expense. So, in this case, if you paid off the credit card in one year (assuming 15% interest), you’d have to pay $2,300.

You should think about the time value of money before making any decisions. Another, maybe even more important concept related to the time value of money is the compounding effect of money.