A little while ago I mentioned that the secret of compound interest was time. That is, the effect of compound interest becomes more and more pronounced over time. That is because compound interest is effectively the investment earnings on investment earnings. And it takes time for the level of investment earnings in a portfolio to increase.
It was great to see this in action when I came across this blog here. This blog shows the people in question aiming to accumulate $1 million of wealth by the year 2016. There is a lot of interesting discussion on their financial journey.
What I found particularly interesting was the length of time taken to reach each financial goal. Their first $100,000 took 5 years to accumulate, although at that time they were not as focused on financial goals. The next $100,000 19 months, the following 11 months and the most recent 8 months. They also received $100,000 as a capital gain from the sale of their house, taking their net wealth to above $500,000 currently.
Each $100,000 became progressively quicker, at least in part because of the help that 'compound interest' was giving them.