The Math Behind The Growth And Tax Consequences Of Your Investments
After rereading Sunday’s post several thousand times and consulting with my editor (my girlfriend), I felt like additional qualitative and quantitative color around what we discussed will be beneficial.
First, reconsidering established consensus on personal finance can matter more to Living The Semi-Retired Life because—
… if you tend to have lots of short-term plans on tighter cycles for your money, not fussing over savings accounts follows similar logic to not putting your money in traditional retirement accounts.
Therefore, tying your money up in anything, but, more so, a restrictive retirement account could create avoidable problems. This is one reason why I don’t use tax-advantageous retirement accounts or fuss over savings account interest. My partner and I are starting a visa process to move next year and renting an apartment right after. Then, within a couple to a few years, we hope to buy an apartment. The benefits simply don’t offset my anxiety over having my money organized and allocated the way I like. As I gradually transfer my banking internationally, I won’t realize the power of compounding anyway. Which leads us to important math you need to know as you consider what we covered Sunday in relation to IRAs yes, but saving and investing in general.
So, what is compounding?