Most people who belong to the middle class tend to have a pattern in the use of money: they enter money through payroll. With this income they acquire LIABILITIES (the house mortgage, the car loan ...) and these liabilities come out in the form of EXPENSE.
There is another way of thinking about this flow of money and it is the one used by rich people. Many people think that wealth is how much people have, that is, from a certain amount of money you become rich. This is not necessarily the case. How long could you maintain your current lifestyle if you stop working now? Most of the people in our society are two salaries from ruin. So is earning a lot of money wealth?
Prosperous people, instead of accumulating debts or liabilities, have gone accumulating ASSETS that give them money without them having to be working. These assets generate income that is what they charge. With this income, they buy back assets that generate more income for them. This builds up to compound interest.
Let's suppose that we start with 5.000 euros and I put it to work for me. I get to put them at 5% compound interest. After 20 years these 5.000 euros will have been transformed into $17.126. The grace of compound interest is that if I double the interest rate at which my money is working and instead of getting 5% I get my money to work at 10% the amount I get is not double, it is 3,5 times my 5.000 euros in the same period of time (20 years). They turn into $63.221.
By Vicens Castellano