by Debra Lohrere

Created on: September 15, 2007

What are the six steps that people who have acheived financial independence have followed?

Following is a list of some of the wealth building principles that I have discovered in my research and conversations with successful people.

These concepts have been utilised extensively by those who have already created enormous wealth.

1. Use the power of Compounding Interest/Growth.

John D. Rockerfeller once described compounding interest as the "Eighth Wonder of the World".

Compounding is also referred to as Rate & Time because the longer the time, and the higher the growth rate, the greater the effects of compounding become.

Compounding works by letting any interest earned get added to the initial investment, and then the next lot of interest is calculated on the sum of the two, and so on. Interest is earned on interest. This gives the effect of exponentially increasing the value of an investment.

One of easiest ways to calculate how compounding interest works with different rates of return is to become familiar with the Rule of 72. This rule states that "The number of years that it will take for your money to double is 72 divided by the interest (growth) rate".
Therefore if you have $1,000.00 invested at 10% interest, then the number of years that it will take for your money to double to $2000.00 is 7.2.
72 divided by 10 = 7.2

2. Use the tried and true method of investing in residential real estate.

Statistics show that over 98% of the world's millionaires have made their money through property.

It should really not come as a surprise, because everyone needs a place to live, and generally at least one third of the population are renting. Property is a necessity, so it can never go out of fashion.

As the population increases, so does the need for housing. The laws of supply and demand therefore will ensure that prices keep rising.

Banks consider property to be one of the most secure investments and because of this they will loan you a high percentage of the value. This leads to the next principle.

3. Using Other Peoples Money or Gearing is a tool used extensively by the wealthy.

Why is using Other People's Money so important? The reason is that it is possible to use "leverage", also known as "gearing" to obtain a greater result, than you could have obtained using only your own contributions. The word leverage comes from "lever". As you know a small amount of force applied on one end of a lever, can produce force far greater than what was initially exerted. A lever has the effect

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