A Penny Saved is a Penny Earned

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[An excerpt from David’s new book: Keep Climbing A Millennial’s Guide to Financial Planning]

Every climb, no matter how big or small, starts with a single step. In the world of finance, it starts with some core basics. I was fortunate to learn indispensable lessons early in life before I even began climbing my own financial mountain. I’m about to pass down a few of these very important principles to you. With this information, I am confident that you’ll be equipped with the financial rope, crampons and ice Axe you need to navigate your own way to the summit of your financial mountain. Your journey may seem daunting, but over time that sense of intimidation or uncertainty will transform into enthusiasm, because with knowledge comes confidence and clarity.

Are you ready for me to share some of the financial wisdom I learned early on?
There are people in one’s life who act as our guides and impact our destiny. My grandma and father have been those mentors to me. To this day, I continue to pass along the financial principles they instilled in me at an early age.

I’ll never forget the day I saw Grandma, she asked me a question that I thought was silly at the time.

David, if you were given the choice of having a penny double every day for one month or a million dollars right now, what would you choose?”
As a young student and soon-to-be entrepreneur, it wasn’t even a contest. “A million dollars for me, please!”

I quickly found out that in this case, ignorance was not bliss. Without wasting a second, Grandma shared the chart below, which continues to fascinate me and to captivate my clients and audiences when I share it. I think you, too, will be astonished by the results.

As you can see, one penny becomes two pennies, which become four pennies and so on. By Day 12, I was beyond convinced that I had made the right decision, as the original penny had only accumulated to $20.48. By Day 18, I was still happy with my choice, as the penny had accumulated to only $1,310 with just 12 days to go.

What happens during those last 12 days is something that you just have to see on paper to believe. Right before my eyes I witnessed that if you take a single penny and double it every day, in just 30 days you will not only surpass $1 million, you end up with more than $5 million. Boy, had I made the wrong choice!

Although almost everyone I have ever approached with this question thinks it will take years for a penny to reach a million dollars, a penny doubling daily is like a rocket ship taking off into space. A rocket spends 80 percent of its fuel during takeoff; once it reaches a certain point, it flies smoothly with minimal consumption.

This was my first lesson in the power of compound interest. Albert Einstein developed countless theories and principles and yet he reportedly declared:
Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.

That’s exactly what you’re doing with those looming credit card bills and student loans. And that’s exactly why we’re going to help you figure out how to pay those off so you can earn compound interest rather than pay it.

So, what exactly is compound interest?

Compound interest results when interest is added to your original contribution, known as the principal. From that moment on, the interest that has been added also earns interest. This eventually forms an avalanche effect. Because the benefits of saving early in life are so greatly magnified by compounding, getting started with saving and investing now can make a big difference in whether you’re able to enjoy your life without experiencing financial worries. Start now, and hopefully one day you might even be able to live independent of the paycheck. Can you imagine working in the future because you choose to—not because you must to cover everyday living expenses?

One of the challenges beginner mountaineers often face is they’re so focused on the summit that they neglect to set small goals along their journey. This lack of goal-setting makes it too easy to return to base camp when bad weather sets in or a lack of oxygen makes their head begin to pound like the morning
after Bonnaroo.
Similarly, people are typically overwhelmed when contemplating the financial journey that lies ahead. But like any goal worth achieving, it’s all about having the end destination in mind and starting with incremental steps. As the world’s great mountaineer Ed Viesturs puts it so eloquently in No Shortcuts to the Top:

Each stretch between a pair of mini-targets becomes its own private struggle. It’s only by nibbling away at these immense distances that you achieve the whole.

It may seem easier to give up on your goals . That’s what most people would do. But you’re not most people, and living a life of mediocrity is just not in your cards. As Henry Ford said:
Some people say they can and some people say they can’t. They are both right.

David Rosell is President of Rosell Wealth Management in Bend. www.RosellWealthManagement.com. He is the author of Failure is Not an Option- Creating Certainty in the Uncertainty of Retiremen and his latest book Keep Climbing A Millennial’s Guide to Financial Planning. Learn more about his book at www.DavidRosell.com. Ask for David’s book at Newport Market, Cafe Sintra, Bluebird Coffee Shop, Dudley’s Bookshop, Roundabout Books and Sunriver Resort. E-Books can be purchased online at or Amazon.com or Barnes & Noble.

Investment advisory services offered through ValMark Advisers, Inc. an SEC Registered Investment Advisor

Securities offered through ValMark Securities, Inc. Member FINRA, SIPC 130 Springside Drive, Ste 300 Akron, Ohio 44333-2431. 800-765-5201. Rosell Wealth Management is a separate entity from ValMark Securities, Inc. and ValMark Advisers, Inc.

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About Author

David Rosell of Rosell Wealth Mangement

David Rosell is president of Rosell Wealth Management in Bend. He is the author of Failure is Not an Option- Creating Certainty in the Uncertainty of Retirement. You may learn more about his book at www.DavidRosell.com or Amazon.com. Ask for David's book at Costco, Barnes & Noble and in Bend at Newport Market, Cafe Sintra, Bluebird Coffee Shop and Powell's Books in Portland.

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