Three billionaires have been in the news recently for their attempts to outdo each other to be the first to reach space. A rocket ship is a great metaphor for getting rich. A Saturn V rocket is 85% fuel by weight. Very little of the rocket’s weight is the rocket. It’s all the rocket fuel. Astronauts ride into space on a giant molotov cocktail. When you launch a rocket, most of the fuel is used during takeoff. Once it breaks free of gravity, it doesn’t need a lot of effort to stay up in space. Those satellites in space that beam you your TV signals, they don’t even have an engine. But they needed an incredible amount of energy just to get off that launch pad and start going higher. Once it’s going up, momentum and reduced gravity kick in and the higher you go, the less energy you need to go even further.
When you start to build wealth, it’s incredibly difficult in the beginning. That first $100,000 feels like an impossible feat. But once you get there, you are the rocket that has freed itself from the launchpad. If it took you ten years to get to your first $100,000, it might only take you five for your second, then two for your third, and when you hit a million dollars, you might be getting an extra hundred thousand dollars twice a year. The same goes for how long it takes to get your first million vs how long it takes to get your second million.
The reason it compounds faster is that not only are you earning money and putting it away, but your money is earning money and investing it. Then that money earns money and invests it. Eventually the money will be earning more on it’s own than you do from your job. This is compounding at it’s best.