Now that tax season is behind us many of us will be wondering what to do with our tax refunds. According to the IRS the average tax refund this year is running right around $3,000. The smart thing to do would be to turn that refund into more than a million dollars.
How? Through the power of peer to peer lending and compound interest. It was Einstein who said that compound interest is one of the most powerful forces in the universe and peer to peer lending allows average investors to unleash that power in a dramatic way. To understand this power take a look at this chart.
|Years to grow||40||40|
|Value in 40 years||$1,148,986||$2,818,093|
Let me explain the logic here. You start your investment this year with a $3,000 tax refund. Then you invest your tax refund every year for the next forty years, which I am assuming to be an average of $5,000 (this is likely conservative as inflation kicks up the average refund). I show a conservative number where you receive an annual return on your investment of 7% and one where the return is 10% (this latter number is closer to the return numbers both Prosper and Lending Club promote). [Read more…]