Introduction to Financial Freedom - Part 2 - Compound Interest.

Compound interest is perhaps one of the most useful financial concepts that you can make use of. In fact, this concept is something that we may or may not be applying in our lives on a daily basis, consciously and unconsciously, correctly and incorrectly.

In simple terms, compound interest is the consecutive sum of a certain action, either for the benefit or against your interests. Every day take 5 tablespoons of sugar with coffee, it results in several kilos of sugar throughout the year. This is exactly what happens with our money.

If, for example, you buy a coffee for $ 5 every day this will add up to $ 35 a week. So from your monthly salary you will be subtracting $ 35 automatically. So this may be sabotaging your financial goals inadvertently.

The same thing happens if you save $ 2 every day, you will find that throughout of a month you will have an extra $ 60 to your salary. If you do not use them, and continue saving under this formula, you will have the next month a total of $ 120.

Compounding does not work on its own. To do this correctly, the idea is that you make a list of all your expenses and highlight the most and least important ones (in future articles we will cover this topic more fully.) Once this is done, you should automatically discard all unnecessary expenses.

If for example; You see that you have 5 unnecessary expenses and between these you add a total of $ 6, so allocate this $ 6 to the compound interest formula. Get started today and count that $ 6 in thirty days.

Remember that financial growth is a long journey every day. Financial foundations are not built overnight. That is why compound interest is a pragmatic formula that allows us to see how our finances grow day by day.