Okay, so maybe the game of Football is not my strong suit, but one thing that I do know is the "Money Game". And in the "Money Game", there is a

*Wealth Equation*. Unlike Football, the

*Wealth Equation*has only three players –

**Money**,

**Interest Rate**and

**Time**. Usually when I ask anyone what they think the most important factor of the

*Wealth Equation*is, I usually get, “Duh,

**Money**of course is the most important! Then

**Interest Rate**and then finally

**Time**.”

But unlike in Football, I

*am*sure what the most important factor in the

*Wealth Equation*is. And, as a matter of fact, I even have proof to back it up. Despite what most people would say,

**Money**is not the most important factor. The most important factor in the

*Wealth Equation*is

**Time**. In fact, if you were to order them by their importance it would be

**Time**followed by

**Interest Rate**then

**Money**.

I am not trying to give you a math lesson here, but I can’t think of an easier way to prove the importance of

**Time**in the

*Wealth Equation*without actually showing you the equation! Because of financial calculators and other financial applications, most people don’t even know what the

*Wealth Equation*looks like. I, however, believe that it is important to at least see the equation and identify all of the players, so you can understand what is going on in the background after you enter your numbers and press the “Submit” button. Here are two different scenarios of the

*Wealth Equation*:

**figures out the Future Value (**

__The One-Time Payment Wealth Equation__*FV*) or the

*Wealth*you would earn from investing a one-time sum of

**Money**and leaving it alone to grow at a certain

**Interest Rate**over a certain period of

**Time**. In this equation,

*PV*stands for Present Value and this represents

**Money**,

*i*represents the

**Interest Rate**and

*N*represents

**Time**.

**figures out the Future Value (**

__The Periodic Payments Wealth Equation__*FV*) or the

*Wealth*you would earn from investing a sum of

**Money**over a certain frequency of

**Time**(i.e. monthly, bi-annually, or annually) at a certain

**Interest Rate**over a certain period of

**Time**. In this equation

*Pmt*represents

**Money**,

*i*represents

**Interest Rate**and

*N*represents

**Time**.

Even if you don’t remember anything about Algebra, I'm sure you probably at least remember which variable in the above equations carries the most weight. If you are thinking the variable

*N*then you are correct. The

*N*carries the most weight because

*N*(

**Time**) is exponential.

__The__:*Wealth Equation*Factors in the Order of Importance**3.) MONEY, believe it or not, is the**, because

*least*important factor in the*Wealth Equation***Money**is linear. Meaning, for example, if you double the

**Money**and leave the

**Interest Rate**and

**Time**the same, then the results will double too. It's a one-to-one relationship

- $2,000.00 @ 8% for 30 years --> $20,125.31
- $4,000.00 @ 8% for 30 years --> $40,250.62 By doubling the
**Money**from $2,000.00 to $4,000, the growth is $20,125.31 which is double. - $8,000.00 @ 8% for 30 years --> $80,501.24 By doubling the
**Money**from $4,000.00 to $8,000, the growth is $40,250.62 which is still only double!

**2.) INTEREST RATE is the next important factor in the**If you take the same

*Wealth Equation*.**Time**and

**Money**and keep doubling the

**Interest Rate**, you can see that the changes in growth are not linear.

- $2,000.00 @ 2% for 30 years --> $3,622.72
- $2,000.00 @ 4% for 30 years --> $6,486.80 By doubling the
**Interest Rate**from 2% to 4%, the growth is $2,864.08. - $2,000.00 @ 8% for 30 years --> $20,125.31 By doubling the
**Interest Rate**from 4% to 8%, the growth is $13,638.51!

**Interest Rate**in the

*Wealth Equation*:

**1.) TIME is the**If you take the same

*most important*factor in the*Wealth Equation*.**Money**and

**Interest Rate**and keep doubling the

**Time**, you can really see the exponential growth.

- $2,000.00 @ 8% for 10 years --> $4,317.85
- $2,000.00 @ 8% for 20 years --> $9,321.91 By doubling the
**Time**from 10 to 20 years, the growth is $5,004.06. - $2,000.00 @ 8% for 40 years --> $43,449.04 By doubling the
**Time**from 20 to 40 years, the growth is $34,127.13!

**Time**in the

*Wealth Equation*:

- The Cost of Waiting (Written by Jeff Olson)
- Never Too Young to Learn: Time – The Most Important Factor in the Money Game
- Investing for Children with a Twist on Inflation
- The Cost of Waiting to Invest
- The Magical Power of Time and Compounding

So, now that you understand how important

**Time**is in the

*Wealth Equation*I hope you are inspired to stop procrastinating and start investing for your future as soon as possible, if you haven’t already. And I hope that you in turn pass on the knowledge of the importance of investing as soon as possible to others too.

*I'm so excited to share this information with you. If you have enjoyed the information or feel that it would benefit someone else, please share it. If you have any questions or comments, please feel free to contact me.*