I was browsing the CNNMoney.com website today and came across one of their retirement calculators, When will you be a millionaire? I kind of chuckled when I read this because right now, I’m not focusing on becoming a millionaire I’m focusing on getting out of debt. However, one of my favorite parts of Dave Ramsey’s radio show is when he discusses the greatest thing in the world of personal finance – compound interest.
So what is compound interest? According to WiseGeek.com:
Compound interest is interest calculated on the principal amount invested, which is then added to the principal amount, and compounded again. Compound interest can be earned daily, weekly, monthly or yearly. Generally the more times an amount is compounded, the more money you can make.
Compound interest plays into the whole “how long until you become a millionaire” scenario. Thanks to compound interest, I won’t have to actually save one million dollars to become a millionaire. Although I don’t have to save one million dollars, according to the CNNMoney.com millionaire calculator, I’ve got a long time to wait to be a millionaire – about 18 years.
However, I’ll still be quite a bit away from retirement age in 18 years so that really isn’t too bad. If I continue to follow Dave Ramsey’s plan, not only will I be a millionaire in 18 years but I won’t have any consumer debt – no credit card payments, no car loans, no student loans, and no mortgage payments. That’s right, a millionaire with no debt. Sounds kind of nice.
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