17 years ago, as a way to reduce expenses so that money could be more productively invested, I began cutting my own hair. At that time I was paying $15 a month to have my hair cut, and I usually gave a $2 tip. Becoming my own barber only saved me $289/year, but $289/year compounded at 10%, which is less than I actually earned on investments over the last 17 years, grows to $10,000! In ten more years the invested savings will grow to $34,000, and eleven years after that–$100,000.
Warren Buffet supposedly realized at the age of 11 that money he might spend for a purchase (in his case it was a bicycle) could, if invested, grow exponentially into a small fortune through the power of compounding. Anyone can put this simple principle to work, so the next time we’re tempted to buy a $300 item, it might be worth remembering what $300, if invested, can grow into over 17, 27, or 38 years.