It either works for you or against you.
I’ll be talking about this one thing that many people know and talk about but rarely use in their daily lives.
It allows you to exponentially increase your returns on an investment. Although it is widely used in terms of money, this isn’t just about money. You don’t even have to interact with this force. It automatically works in the background.
The only power that works for the privileged as well as the unprivileged.
It is the power of Compounding.
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
― Albert Einstein
However, I am not going to talk about how you can invest small amounts of money and how it will grow over the years so you can finally, Die rich. That’s just the financial aspect of compounding, and I am not a financial advisor.
*Put your cards back in the wallet and let’s get started*
There are other aspects, too, where compounding plays a huge role but first, let me break it down for you.
Basic idea of compounding
You see, compounding basically works by taking small amounts of work or efforts and putting them together until it becomes a big pile of those things (simplified).
Compounding works extremely well with time because it takes time to create a big pile from small things. The simplicity of this power, while being extremely potent, makes it very popular when it comes to money because everybody wants more money.
Compounding impacts your day-to-day life, but its results only start to appear on the long-term timeline.
The good compounding
I’ll start this with a simple example.
Do you ever look at people with a jacked physique and wonder how they gained it?
Some people assume that they use steroids and other substances to become this big, while others think they have a good genetic inheritance that helped them to become this big (this could be true for a few). Meanwhile, many of them trained for years to get this good.
They have the same exercises and machines at their disposal. It’s just that they have taken the time and effort to show up every day for years to get this good and have compounded those results in the form of their physique.
Another example could be some of the biggest writers on this platform (like Tim Denning and Ayodeji Awosika) saying they are not professionals. Yet they are top-notch writers on this platform. They have built up a huge audience over the years by being consistent, which compounded their results.
Consistency and discipline compound into a big pile that can eventually be seen from a mile.
The bad compounding
You see, things that give you instant gratification at the time compound into something bigger over time.
For e.g. People, on average, spend 2 hours a day on social media websites. When you look at the analytics (for social media apps that provide such insights), it will show you a daily timeframe for a week, which is all good.
Many people don’t scale it over a longer time frame. Some see it only from a week-long perspective, and some don’t even bother.
You see, when you take 2 hours a day and compound it over a year-based timeframe, the math is totally different. It goes to approximately 730 hours a year for the average, which can be way greater for some people.
*I am looking at you, people who like to be above average.*
I don’t mean to terrify you, but this is also compounding, i.e., the small number of hours in a given day adding up to a big pile on that yearly sheet. However, your “most important asset” is limited. Time.
Another prevalent example is people who like to smoke. It makes them feel good for a short period of time (again, instant gratification!) but fuels other health conditions in the long run. In this case, the health conditions are compounding to become a serious problem as time passes.
Compounding for you
To anyone who’s still wondering how to make compounding work for them…
For your physical self, you don’t have to lift a lot of heavy weights; just do it every day. Even if you have a busy schedule or don’t want to go to the gym, take out one hour each day for rigorous exercise. You’ll start feeling more energetic and better as time goes by.
For personal growth, take up a new skill and make the time to learn it every day. If you have a goal, find out the necessary skills required to achieve it and start working on them one by one. Invest in your skills as much as you can.
For your mental growth, make time to care for your mind. Eliminate things that cause stress and anxiety because they can compound into problems. Instead, try to find clarity about yourself and the things you enjoy, and work on them daily.
For the money part, you know how it works, and you can find lots of examples on the internet. Don’t miss out on the benefits of compounding here, either.
Have you read the book Atomic Habits by James Clear?
If not, give it a try.
It is based on improving yourself by 1% every day and goes over techniques on how to actually do it. It sums up the power of compounding very well.
If you like this article or have any questions, go ahead and comment.
