Time. It is one of the few ways all of us are truly equal. We all have the same 24 hours in each day. There aren’t folks our there who are given 30 hours each day. Nor does anyone have to make do with 20 hours.

How we choose to make use of those hours is one of the many things that differentiates us.

For example are we going to use that gift of time to *pay* interest by borrowing on our revolving credit cards? Or are we going to *earn* interest on some sort of investment program?

The choice is ours.

Compound Interest. We’ve all heard the term.

But did you know that time has the biggest impact of the three main variables associated with savings, time, amount stashed away, and interest rate?

For example a little playing around with a simple Compound Interest Calculator reveals some interesting results.

Let’s assume that we decide to commit to save $250 each and every month, no matter what happens. For the sake of discussion, lets assume that we are just getting started and don’t have any other seed money to put into our account. If we assume we can find a place to stick it which will earn 10% interest per year and we can build our account for 30 years we will end up with over $542,000 in our account.

Let’s see what happens when we start playing with the variables.

If we cut the amount of time by 1/3 and say we’ll only stay on our program for 20 years then we’ll end up with only $189K.

If we instead reduce the amount we save each month by 1/3 so that we only end up stashing away $2,000 per year (about $167 per month) instead of $3,000 we’ll end up with $361K.

If we stick with our program but only get 1/3 lower interest rate on our account, say 6.66%, we’ll end up with $284K.

You can see that time is the biggest factor in accumulating wealth. Slow and steady wins this race.

Another way to look at it is this. To get the same results with only 20 years you have to save about $720 each and every month. With the lower interest rate you will have to save about $480 per month for the same results. And if you just can’t scrape together the $250 a month to meet your savings goal, it would take you just a little over 4 years longer to get to the same place.

Now imagine the difference is paying the mortgage company interest. The longer the term of the loan, the more money the bank makes from you and the less you get to put toward your savings. A 5.3%, thirty year note on a $175K mortgage will end up paying almost double for the house with just under $175K in interest.

That is simplistic, I know. But the principle holds. There is a proverb that says “The borrower is servant to the lender.”

The question is which side of the equation do you want to be on? Borrower or Lender? Servant or Master?

Each one of us gets to choose.