Bright Hub currently offers writers $10 for each article they write. If you where to write one article a day for a year, that would result in $3,650 (or an average of $304.17 per month). If you were to continue this for 35 years, you would earn a total of $127,750. A decent amount of money for spending what is likely not more than an extra hour a day doing what you love (which is writing if indeed you are a true writer).
While good money, this total is far from the million dollars this article claims you can earn. However, rather than spend that money, if you where to invest the money you earned each month, you could indeed retire a millionaire due to the power of compound interest.
What is Compound Interest?
Interest in general is money that someone pays to someone else as a fee for borrowing money that is in addition to repaying the money actually borrowed. The amount of interest that a borrower pays to the person lending them the money is usually not a fixed amount rather it is a certain percentage (interest rate) of the of the amount of the money currently owed (principal). This interest ‘compounds’ on a periodic basis, which is to say that it the fee you pay for borrowing the money is added to the current amount owed every certain number of days (every month, quarterly, annually, etc.) . It is sort of like renting the use of the money borrowed. If you are occupying the money, no one else can use it, so the fee is charged on a recurring basis as an incentive for you to pay it back.
For example, if you borrow $100 and have a 10% interest rate that compounds annually, that means that after a year of borrowing the money you would own $10 in interest (100 * 0.10). When compounded to your initial principal ($100), you would now owe a total of $110. After year two, you would owe an additional $11 (110 * 0.10), which would bring the total owed to $121. It is important to note here that the interest that accumulated in the second year ($11) is more than what accumulated in the first year ($10). This is due to the fact that the interest owed is based on the current principal, which was higher after the first year due to the first year’s worth of interest that was compounded to it.
Making Your Money Work For You
When you are the one that is borrowing money, compound interest is not your friend, and you are forced to work for your money. If you are the one lending the money however, compound interest can be a wonderful thing, and your money can work for you in a sense. If you where the lender in the above example, after the first 2 years, you would have earned $21 extra dollars for doing nothing other than letting someone else use your money.
There are many different people you can lend your money to. When you deposit your money in a bank, you are essentially lending your money to them. This is why they often pay you a small interest rate on that money. Banks then take that money that they are borrowing from you and re-lend it to others who then pay them interest. A bank only ever keeps enough money physically within it to ensure that it has enough money to give to people that are likely to request to withdraw it at any one time.
Similar to banks, you too can choose to lend your money to others. By others, I don’t mean other people necessarily; I primarily mean other investments such as the stocks or bonds. Your return on such investments is their compensation to you for letting them borrow your money. While the economy is in the slumps now, over time it is quite possible to get an average rate of return of 10% on your investments.
One Million Dollars Realized
If you where to invest the $10 a day that you earn by writing an article into a collection of investments that averaged a return of 10% per year, at the end of 35 years, instead of having a mere $127,750 dollars, you would have a grand total of $1,088,162.84. If you then stopped working and contributing your $10 a day, not only would you have your million dollars, the interest from these investments alone would produce over $100,000 annually for you to live on. Pretty good for writing just one article per day!
Revenue Sharing As An Additional Annuity
The numbers quoted above only take into account the money paid up front for the article. In addition to that, Bright Hub pays out a percentage of the revenue generated from ads that are displayed when your article is viewed. The amount of money generated each month from all the articles written would add even more money to your bank account each month. If that money where invested as well, it is likely that you would reach one million dollars in a fraction of the time noted above.
