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Einstein Called It “The Eighth Wonder of The World”

If you’re a photographer or creative business owner striving to grow your business, increase profits, and build long-term wealth, understanding compound interest can be a game-changer. Many creatives focus on generating income but overlook how to make their money work for them—and that’s where compound interest comes in.

Albert Einstein famously called compound interest the 8th wonder of the world, saying “He who understands it, earns it…he who doesn’t, pays it.”

This quote couldn’t be more true. You’re either using compound interest to your advantage, or it’s working against you—especially when it comes to debt.

In this post, we’ll break down how compound interest works, why it’s crucial for business owners, and how you can leverage it to build wealth effortlessly.

What is Compound Interest?

Compound interest is the process of earning interest on both your initial investment and the accumulated interest over time. Unlike simple interest, where you only earn interest on your principal, compound interest allows your money to grow exponentially.

The Rule of 72: A Simple Trick to Predict Growth

Want to estimate how fast your money can double with compound interest? Use the Rule of 72:

• Divide 72 by your expected annual return percentage.
• Example: If your investment grows at 8% per year, your money will double in 9 years (72 ÷ 8 = 9).

The earlier you start, the greater the compounding effect—meaning even small investments now can turn into significant wealth later.

Why Starting Early Matters

Time is your greatest asset. The sooner you start investing, the more exponential growth you’ll experience. Let’s compare two scenarios:

• Person A starts investing $100 per month at age 25 and earns an 8% return annually. By age 65, they have $350,000+.
• Person B waits until 35 to invest the same amount at the same rate. By age 65, they have only $150,000.

A 10-year delay cut their potential wealth by more than half! Even if you think you’re late to the game, starting today is always better than waiting another year.

How to Make Compound Interest Work for You

The key to harnessing compound interest is to make consistent contributions and allow time to do the heavy lifting. Here’s how you can start:

1. Leverage High Interest and High Returns

• Consider low-cost index funds for long-term investments.
• Use high-yield savings accounts for short-term savings—while not an investment, you’ll earn higher interest on your shorter term savings

2. Be Consistent

• Set up automated monthly contributions to your investment and savings accounts.
• Even small amounts add up—don’t wait until you have a ‘large’ sum to invest.

3. Reinvest Your Earnings

• Choose accounts that automatically reinvest your dividends rather than withdrawing them.
• This allows your returns to compound even faster.

4. Avoid High-Interest Debt

• Just as compound interest can grow your investments, it can also work against you.
• Consumer debt such as credit cards compound daily, making it harder to get ahead.
• Pay off high-interest debts first to free up more money for investing.

Why This Matters

You might be wondering, “How does this apply to my photography business?” Here’s how:

• Retirement Savings: If your business is your primary income source, investing early and consistently ensures you’ll have financial security in the future.
• Building Passive Income: Investing in assets that grow over time means you’re not solely relying on one source of income. Believe it or not there will come a day when you want to step away from your business and stop trading your time for money.

Start Growing Your Wealth Today

The good news? You don’t need thousands of dollars to start investing. The most important factor is time—so start today, even if it’s a small amount! Investing isn’t just for the super wealthy, anyone can leverage it! 

Want to dive deeper into this strategy? Listen to the full episode.

Want to track your finances like a pro and make sure every dollar you earn is working for you. Download my free Wealth Dashboard

Final Thoughts

Wealth-building isn’t just about making more money—it’s about making your money work harder for you than you did for it. By leveraging compound interest, you can create financial security, reduce stress, and ultimately build the financial freedom and lifestyle you’ve always wanted.

Resources

• Motivated Money by Peter Thornhill
• Mindful Money by Canna Campbell
• I Will Teach You to Be Rich by Ramit Sethi