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PLP-123 Compound Interest – the 8th Wonder of the World

Hello Private Lender nation and welcome to episode 123 of the Private Lender Podcast, I’m your host, Keith Baker and I’d like to thank you for sharing your time with me today. 

If you’re looking for practical tips and advice on Private Lending and how to keep your money safe as a Private Lender, then you are in the right place. But if you want to learn from my mistakes so you can avoid them, well then pull up a chair and pour yourself a drink my friend, because this podcast is just for you!

If you’re looking for practical tips and advice on Private Lending and how to keep your money safe as a Private Lender, then you are in the right place. But if you want to learn from my mistakes so you can avoid them, well then pull up a chair and pour yourself a drink my friend, because this podcast is just for you!

Before I jump into today’s episode, I want to give a shout-out to Blake who sat next to me on a flight to Nashville recently. He’s a young man who is leaving the world of commercial real estate to go back to school to follow his passion. And he has a great outlook on money and not wasting it just because you have it. Blake, hold on to both your passion and your outlook on money and wealth – they will serve you well and I wish you all the best!

In today’s episode, we will continue to explore the lessons found in the book “The Richest Man in Babylon”. Today we will be discussing the 3rd cure for a lean account: Make your money multiply with compound interest.

But first, a little housekeeping. . . . .

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Let’s get down to the Brass Tacks

Today’s topic is another lesson from the Richest Man in Babylon written by George Samuel Clason. Today is the fifth installment where we will be discussing the 3rd cure for a lean purse, or as I like to think about it, a cure for a low account balance. And like so many lessons in life that we should heed, the principle is quite simple, but we humans seem to have trouble with the execution. 

If you would like, you can go back and catch up on the first four installments in the following episodes:

Episode 114:  First Cure for a lean account – save 10% of everything you earn for the future

Episode 116:  First Law of Wealth – Wealth comes to those who reserve AT LEAST 10% of their total earnings towards building their future financial independence/fortune.

Episode 118: Second cure for a lean account – control thy expenses

Episode 120: Second Law of Wealth – “work hard for your money, but then make your money work harder for you

So, let’s discuss the 3rd cure for a lean account

So if you follow the lesson sequence from the book, you are beginning to increase your account value- and this is no doubt very satisfying to see it grow. However, if your money is in a savings account then you are not earning very much. According to Bankrate.com, at the end of March 2021, the national average for savings accounts was 0.07%.

While earning cash flow and saving a portion of it is but the first step to generating wealth, the 3rd cure is to put each dollar that you have saved to work for you so that it will generate more money and wealth. Then, take the earnings and add them back into the account such that your earning will compound. I am a firm believer that this process should begin as soon we begin to earn money and should continue until the day we leave this earth.

This is the essence of compound interest.

For simple math, let’s say you start with 100k and receive 10%, or 110k when the loan is paid off. Then you incorporate the 10k earned in interest into the next loan so that you can earn interest off your interest. So your next loan amount would be 110k. 

Make 1 loan at 10% every year and the original 100k will be worth $672,750 after 20 years – and that is if you don’t add any more money

Compound interest is the 8th wonder of the world. He who understands it earns it; he who doesn’t pays it.

Here’s the deal, I don’t charge money for this show, but there is a cost and I would be extremely grateful if you would help drive awareness to the show, to get the word out by leaving me an honest rating and review over at iTunes, Google Podcast or whatever platform you are using to hear my voice. 

It doesn’t take that long and it’s a small price for the value I try to provide. 

And if you are looking to create your stable of private lenders, or know people who have money but don’t realize the power of private lending, please, please send them a text, an email, a DM, and introduce them to the PLP.

 

That’s gonna do it for Episode 123 and just a few final thoughts:

1 – please join the Private Lender Podcast Facebook Group to connect, learn, inspiration and discussion

2 – Remember, the EASY button to lending in the Houston, TX market can be found at www.PrivateLenderPodcast.com/ink

So, as I sign off I’d like to say in addition to mindfulness and self-awareness, I wish you safe and prosperous Private Lending.

I’ll catch you on the next episode.

-k

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About the author, Keith Baker

My ultimate goal is to create an economy for Real Estate (and other) Investors where banks are no longer needed. An economy where every day people look to each other for leverage and support. During the day I am an insurance adjuster for the oil field, where I handle millions of dollars of other people's money (OPM), and by night I invest in Real Estate and host this podcast. I hope you have an excellent experience and find real value within this website and the Private Lender Podcast. Please leave comments or submit your questions on the Contact Page.

I wish you prosperous, safe and happy lending and investing!

Thanks for listening

-k

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