You may have heard the term of compounding, compounding interest, compounding investments, or the compounding effect. In financial terms, Compounding is the process in which an asset’s earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.
I read a book called the Compound Effect, and what I learned Darren Hardy are principles of how to achieve results and being successful in life.
- How to win–every time! The No. 1 strategy to achieve any goal and triumph over any competitor, even if they’re smarter, more talented or more experienced.
- Eradicating your bad habits (some you might be unaware of!) that are derailing your progress.
- Painlessly installing the few key disciplines required for major breakthroughs.
- The real, lasting keys to motivation–how to get yourself to do things you don’t feel like doing.
- Capturing the elusive, awesome force of momentum. Catch this, and you’ll be unstoppable.
- The acceleration secrets of superachievers. Do they have an unfair advantage? Yes, they do, and now you can too!
The things you do today and consistently do everyday, has a compounding effect on your future. Let’s take “losing weight” as an example. If you had a new years resolution to lose weight, started strong for the first few weeks, and slowly stopped exercising or watching what you eat, you just lost your momentum and any compounding effect you could have had.
If you want your money to grow, find ways to continually save or invest. You will experience the compound effect and it will continue to grow over time.
If you want to grow your social media presence, consistently create content. You won’t be recognized overnight. It will take time and once your content becomes more and more attractive, you will experience the compounding effect.
From a financial standpoint, I’ve been re-investing all my quarterly dividends I receive. I don’t withdraw them. I can say that my portfolio is much bigger now than if I would have withdrew it. I’m also paying extra towards my mortgage principal. It may seem like it barely makes a dent but with consistency, the compounding effect on it long term will save me years on my loan.
As I wrote about my 22 years of retirement contributions the effects of consistently contributing versus not is so drastic. You can see in the early years it barely makes a difference. However, once you hit past 10 years, you can dramatically see the different results.
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The small things you work on today and everyday after will work towards your future success. The compounding results may not been seen today, but wait for it years down the road. You will see results. This principle can be applied to any aspects of your life, from education, playing sports, becoming an entrepreneur, investing, saving, building a career, and more. If you are interested in following my journey, email subscribe to get alerts of latest posts and follow me on Facebook.