“Compound interest is the eighth wonder of the world. Those who understand it, earn it… those who don’t… pay it.” ~ Albert Einstein
When we invest money, the interest we earn on that money also earns interest for us. Over years of consistent investing, the interest-earning-interest can wind up being a significant sum. While we might not see big results right away, the impact of compounding will soon become significant. This is the concept of compounding interest.
Here’s thing about compounding that most people don’t realize… it’s just as effective in other areas of life beyond finance.
The healthy habits we intentionally develop, and continue to practice year over year, yield desired results.
- A healthy diet yields good health
- Healthy spending habits yield control over your finances
- Healthy saving and investing habits yield financial freedom
- Continuous learning exposes you to new ideas and fresh perspectives
Here’s one more thing most people may not realize about compounding… it can also work against you. Compounding is not limited to yielding increasingly good results. Our bad habits, practiced year over year, can unintentionally yield undesirable results.
- A bad diet yields poor health
- Poor spending habits yields a consistent lack of money and debt
- Failure to save and invest yields financial insecurity and potentially poverty
- Deciding not to learn lead to becoming stagnant, outdated, and irrelevant
The most important thing we can know about compounding is that it will do its work in our life whether we invite it to or not. The most important thing we can do with regard to compounding it to make sure we’re putting it to work for us.
ACTION: Develop and regularly practice the habits that will compound to bring you the results you seek.