People think investing will make you

rich because of compound interest.

Invest €200 a month at 10% a year for 40

years and you're a millionaire. Based on

my 19 years of professional investment

experience, both on Wall Street and here

in Europe, that doesn't really work in

practice. But investing can make you

rich through a different powerful

mechanism that many people don't

understand. And to explain it, let's

first explore the math of compound

interest. Just take a look at the simple

investment calculator. Let's say you

invest for 40 years, you invest €200 a

month and you earn like 10% per year on

average. Well, in 40 years you really

will have 1.1 million euros. So that's

great. But there are at least four

problems with these numbers. To

illustrate the first problem, let me

admit an embarrassing truth. I'm a

professional investor. Today I teach

beginning investors for a living, but I

didn't start investing my own money

seriously until the age of 30 when my

son was born. In my 20s, I was much more

interested in traveling and meeting

girls and enjoying life than saving and

investing. And I don't think I'm a big

exception. Among my students, almost

nobody is under the age of 30. Many

people start at the age of 40 or 50. So,

let's go back to our calculator. Let's

say you don't have 40 years for

investing. Let's say you invest for 20

years, but nothing else changes. Well,

instead of 1.1 million, you would end up

with 144,000.

And that's still a significant amount,

but it won't make you rich. Now, I

discovered the second problem with

compound interest soon after my son was

born. I had just gotten into saving and

investing in a serious way when my wife

told me we had some big spending to do.

Not just diapers and a baby carriage, we

needed to move to a bigger apartment and

we needed a car. This compound interest

math assumes that you will put money

away and never touch it. But in reality,

you will take money out from time to

time. And that is completely fine. I

mean, we save and and so that we can

spend in the future. And in practice,

that looks like a new car or a fixed

roof or a vacation. But every time that

you take money out, you interrupt the

compounding. Now, the third problem with

compound interest can sometimes be

avoided by investing in pension funds.

But in most European countries, when you

earn a profit from investing, you will

pay anywhere between 10% and 50% in

taxes. So, that's going to cut your

million euros down to size. And then

there's a fourth problem, which is a

real wealth destroyer. Today, a pint of

beer in the UK costs £5 on average. 40

years ago, it cost 82 p. The average

house cost £29,000

in 1986 compared to 260,000

today. Inflation means money loses value

over time. And the reality is that if

you started investing four decades ago

and became a millionaire today, your

money will buy you much less than back

when you started. Now, don't get me

wrong. If you invest €200 or pounds or

francs every month for 40 years, that's

a tremendous achievement. Great job. I

mean, it's going to make your life so

much better. But for most people,

compound interest alone is not enough to

make you rich. Once you realize this, it

is tempting to say, "Well, why bother?

Just give up on investing altogether."

But that would be a huge mistake. Well,

first because growing your savings

through compound interest is much better

than leaving them to lose value in your

bank account. And second, because there

is a little-known secondary benefit to

investing, which really can make you

wealthy. And this secondary benefit has

less to do with numbers and more to do

with mindset. To explain it, let me take

you back five years to when I taught a

personal finance seminar at a big

Latvian company. During the break, I was

sitting in the bathroom scrolling on my

phone, as you do, when I heard some

people come in. One of them said, "That

Tom guy, he's a real penny-pincher,

isn't he?" I found it quite amusing

because you know, people think that

saving money makes you miserable. They

think it means sacrificing enjoyment

today for an uncertain benefit in the

future. Saving and investing actually

gets you a big benefit immediately,

today. And this benefit is a clear

vision of the future. Suddenly, you have

a plan for how to escape the rat race

where people live paycheck to paycheck

until age 65 and then get a small

government pension. As an investor, when

you go to work in the morning, it's not

just to survive until 5:00 p.m. or until

the weekend. You go to work in order to

build a better future for yourself and

your family. And in my experience, that

doesn't just make work a lot more

enjoyable and meaningful, it also makes

it a lot more profitable. You see,

people always tell me that they will

start investing once they have a higher

income. But in my experience, that's

exactly backwards. My income increased

dramatically after my son was born and I

started investing. Something clicked in

my head. It was a real light bulb

moment. I never cared too much about

eating at fancy restaurants or traveling

in business class, so it was hard to

find the motivation to work super hard

to make a lot of money. But I realized I

did care a lot about financial freedom

for my new family, and that drove me to

take massive action. Now, here are just

a few steps that I took to accelerate my

wealth. And before I explain them, let

me be clear, this is not a magic

formula. It doesn't work instantly. It's

not always smooth sailing. But these

three steps have worked both for me and

for many professionals that I've coached

over the years. First, don't accept your

current income level as the best you can

do. Unless you have spent many months

and dozens of conversations trying to

get more, you don't know your true

market value. You could be way

underpriced. So, talk to everybody in

your network and take the time to look

for better opportunities. All it takes

is one job offer to potentially grow

your monthly income by hundreds or even

thousands of euros. Second, look for

results-based pay. Here in Europe, fixed

salaries are typically quite low, but if

you can get a results-based job like a

sales or business development position,

well, on the one hand, it's risky

because if you don't perform, you don't

get paid, which is why most people don't

like those jobs, but on the other hand,

if you're motivated and good at your

job, and if you work hard, the sky is

the limit. I personally know

25-year-olds making 5,000 euros per

month and more. And third, learn to

negotiate. Read Jim Camp's Start with No

or Chris Voss's Never Split the

Difference. A simple conversation with

your boss, which adds 10% to your

salary, can actually double how much you

can invest every month. These three

steps are the blueprint I followed to

become the CEO of a startup investment

company 10 years ago, and it transformed

my family's finances. But you don't have

to become a startup CEO for this process

to make a big difference for your

wealth. Even a few hundred euros extra

every month can make a big impact.

Because here is the uncomfortable truth

that people usually don't talk about in

the investment industry. The single

biggest factor for your investment

success is not your strategy. It's not

which stock or fund you pick. It is how

much you invest. Let's go back to our

calculator. So, if you invest 200 euros

a month for 20 years, and you get 10%

per year, you will end up with 144,000.

Now, if you increase the amount that you

invest every year with inflation, so

maybe that's 3% per year, you'll end up

with 177,000.

But if you made a big push to get a

better job, maybe you could invest 500

euros a month instead of 200. So, that

would increase the outcome to 440,000.

And if you're ambitious and push hard,

and your career grows faster, maybe you

can increase the amount that you invest

by 5% every year. And that means you

would end up with half a million. Now,

those might seem like big numbers, and

they are, but they are achievable. I've

seen that many times. If you can push a

little more and you find a way to put

aside a thousand euros a month, in 20

years you get to your first million. So,

this is why compound interest alone is

not enough to make you rich, but the

motivation that investing gives you

absolutely can be. Put aside 50 euros a

month or 100 or whatever you can afford

today. Get going on the investing

journey and let it motivate you to do

more. In the worst case, good old

compound interest will make you

financially comfortable. Maybe not rich,

but much better off than if you didn't

invest at all. But in the best case,

investing will change your entire

relationship with money and that can

indeed make you wealthy over time. Now,

once you decide to start investing, you

will of course have many other questions

like which investment should I choose

and what about the risks and when is the

right moment to get started? Well, to

find out the answers, watch this video

next where I walk you through the best

way to begin investing if you live in

Europe.