Missed Fortune Super Blog

A Savings Vehicle That Makes All the Difference

Missed Fortune – Changing the Way We Think About Growth

Posted on | November 25, 2013

Linear vs. Exponential Growth

Imagine that you have a piece of regular copy paper. Picture folding it in half and then folding in in half once more time. Now imagine that we could fold this sheet of paper in half another 48 times.

How thick do you suppose that piece of copy paper would be after being folded a grand total of 50 times?

The answer may surprise you as it often does even to people who work with numbers like CPAs and tax attorneys. Their answer will vary anywhere from a few inches thick to a couple hundred miles in thickness. If you were to fold a single sheet of copy paper 50 times, it would be 93 million miles in thickness.

If you find that astounding, here comes the real mind-blower. If you could fold in in half just one more time, that 51st fold would increase the thickness the distance to the sun and back. It’s a powerful illustration of exponential growth as opposed to linear growth.

This is a concept that is well understood by the professionals who head up prosperous companies.

It would be the difference of making $75,000 a year at age 30 and wanting your income or net worth at age 60 to worth 10 times what it is currently. Why settle for linear growth when you could be increasing your net worth by 10 times every 5 years?

Did you know that there are about 76 companies right now in America that are growing at 60% a year? That is ten times growth every five years. It means that in 30 years, at that growth rate, they’ll be doing one million times what they’re doing today.

It’s not impossible. Exponential growth is the key to greater abundance than linear growth will ever be.

Einstein on Compound Interest

Exponential growth is one of the reasons that Albert Einstein referred to compound interest as the “eighth wonder of the world.”

CPAs and tax attorneys who have grasped what compound interest can do, have a profound moment of revelation. Their futures and their clients’ futures are never the same from that moment on.

As you consider your personal wealth or your company’s growth, start thinking exponentially. Learn more of the principles of true or authentic wealth and the door to abundance will swing open.

Compound interest is just one of three marvels or miracles of wealth accumulation.

The second marvel is tax-favored accumulation. A dollar that doubles every period for 20 periods will grow to $1,048,000—if it is tax-free. However, if it is taxed-as-earned, which is the way most people save, after doubling for 20 consecutive periods, it will only be worth $72,000 if you’re in a 25% tax bracket.

It’s even worse if you’re in a higher bracket. This is because a combination of state and federal taxes will take roughly a third of that money at each turn. That turns what could have been a million dollar nest egg into just $27,000 after doubling for 20 consecutive periods. That’s only 2.7% of what you could have had.

Those who have tax-deferred savings vehicles like IRAs and 401(k)s are at risk not only from the costs of higher taxes they must eventually pay, but also the effects of inflation shrinking the purchasing power of every dollar they’ve saved.

Forgoing tax-favored accumulation means flirting with the possibility of depleting your retirement nest egg long before your life is complete.

A third marvel of wealth accumulation is safe positive leverage.

Each of these marvels can be learned and applied to harness the principles of abundance and wealth accumulation. They will allow you to think and grow exponentially rather than through simple linear growth.

Learn more by visiting with a wealth architect today.

Related Articles:

*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

Be Sociable, Share!
  • more Missed Fortune   Changing the Way We Think About Growth


Leave a Reply

Warning: Unknown: open(/home/content/36/3927036/tmp/sess_8d2v09mi0hd49a56t9vh6h67l2, O_RDWR) failed: No such file or directory (2) in Unknown on line 0

Warning: Unknown: Failed to write session data (files). Please verify that the current setting of session.save_path is correct () in Unknown on line 0