The impact of inflation also compounds over time, but this is not good news. Inflation works against you by decreasing the buying power of your hard‐earned savings. For example, a dollar bill acquired at the founding of the Federal Reserve in December 1913 and tucked under the mattress for safekeeping would buy a mere four cents of what it snared back then. Inflation has historically averaged about 3 percent. According to the Rule of 72, that means your purchasing power gets cut in half every 24 years. Keep active at work or your home office with a standing desk that will help you to change working positions often.
Investment costs and taxes create a similar drag on your rate of return. Let's continue with the previous example in which you save $250 a month into an investment account that earns 8 percent a year from age 22 to age 67. Without costs and taxes, you would retire with $1,318,635. Because investing is not a costless activity, let's assume you pay 1.5 percent for investment‐related fees. These fees come directly out of your 8 percent return and reduce your ending balance to $807,125. Improved health? Collaboration? Productivity? Get all of these benefits and more with a adjustable standing desk from your favourite online retailer.
Taxes also reduce returns if you aren't using a tax‐deferred account like an IRA or an employer‐sponsored retirement plan. The impact of taxes will vary by your state of residence, income level, and mix of investment accounts. Given all the variables, let's simply assume that you pay taxes equal to 6 percent of your investment balance each year. Continuing with our example from before, the ending balance after costs and taxes comes to $713,230. In other words, the negative impact of compounding from investment fees and taxes wiped out more than half of your investment account. A stand up desk is a desk conceived for writing, reading or drawing while standing up or while sitting on a high stool.
Another area that compounding can work against you is when you take on debt. Unfortunately, many people need to take on debt at some point in their lives. Most people could not afford a home without a mortgage. Many others couldn't pay for higher education without student loans. These are both examples of good debt because they can positively contribute to your overall net worth. Unlike a car that depreciates in value the moment you drive it off the dealer's lot, a home's price generally appreciates at a rate similar to inflation. As for education, student loans are an investment in your ability to earn a higher income. A height-adjustable sit stand desk helps you cycle between sitting and standing throughout your workday.
Credit card debt, on the other hand, is bad debt because it's typically the result of unnecessary consumption or poor planning—and, more importantly, comes with high interest rates and low minimum payments. That combination of factors plus compound interest makes the cost of using credit cards enormous. Imagine buying a new TV for $2,500 using a credit card with a 16 percent annual percentage rate (APR) and making minimum payments of $50 until the balance is paid off. In this scenario, compounding creates $3,994 in interest costs over the nearly 22 years it takes to pay off the original $2,500 purchase. Working at a electric standing desk may offer health benefits, however, studies suggest that doing so probably will not help you burn a lot of extra calories.