No. 03 — Invest
Compound interest
Simple interest pays you on what you put in. Compound interest pays you on what you put in plus everything it already earned. That one recursive step is the entire mechanism behind ordinary people reaching $1,000,000.
The mechanism in one example
Invest $10,000 at 7%. Year one earns $700. Year two earns 7% of $10,700 — $749. The gains themselves start earning, and the curve bends upward. Left alone for 40 years, that single $10,000 becomes about $150,000 without another dollar added. Nothing happened except time.
The rule of 72
Divide 72 by your annual return to estimate how many years a sum takes to double. At 7%, money doubles roughly every 10.3 years — four doublings in a working lifetime. That's why $60,000 invested at 25 can quietly become close to a million by 65, and why the same $60,000 invested at 55 cannot.
Time beats rate, and it isn't close
| Investor | Invests | Years at 7% | Result |
|---|---|---|---|
| Starts at 25 | $381/month | 40 | ~$1,000,000 |
| Starts at 35 | $820/month | 30 | ~$1,000,000 |
| Starts at 45 | $1,920/month | 20 | ~$1,000,000 |
Each decade of delay roughly doubles the monthly price of the same outcome. This is also why obsessing over squeezing 8% instead of 7% is the wrong fight for most people — starting this year instead of "someday" is worth far more than any tweak to the portfolio. Where the 7% figure comes from is covered in index funds.
Compounding works in reverse, too
A credit card at 24% APR is compound interest pointed at you: the doubling time of your debt is three years. This is why clearing high-interest debt is mathematically identical to earning a guaranteed 24% return, and why it comes before investing in every sane plan.
The two ways people break the machine
First, interrupting it: selling during crashes converts temporary declines into permanent ones and resets the doubling clock. Second, feeding it fees: a 1% annual advisory fee sounds trivial but consumes roughly a quarter of a 40-year outcome. The fixes are behavioral (millionaire habits, dollar-cost averaging) and structural (cheap index funds).
See the curve with your own numbers in the compound interest calculator, or jump straight to your date with the millionaire calculator.