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What Everyone Ought To Know About The Power Of Compounding | HealthMoneySuccess.com | Personal Development

What Everyone Ought To Know About The Power Of Compounding

14 Comments Posted in Personal Development

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Image courtesy of House Of Sims

Most people have trouble in consistency and persisting in the things they do and they just give up because it is hard. What they don’t know is that if they are consistent and persistent in their action, the power of compounding will help them to make things easier and easier for them.

I was first introduced to the law of compounding when I was reading a book on how Warren Buffett amassed such a great fortune. He basically make great investment choices and let it compound year over year. That is how he becomes a billionaire in the process.

What you need to know about compounding

So what does compounding got to do with our life? The focus is not on investment here. I’m going to talk about the difference it will make if you allow your effort to compound. But first of all, let me show you an example of compounding interest.

Person A
Did not take out a single penny from his investments.

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Notice how the returns increase every year? Every single year the compounding effect took place and allow the investment to snowball into greater earnings. As the compounding effect goes on, it seems like making money is easier and easier for person A.

Person B
Took out his returns every year.

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You can see that person B did not use the law of compounding to his benefit. By taking out his returns every single year and spending it, his earnings are stagnant and it does not have the snowball effect. By preventing compounding to happen, making money seems harder to person B.

Lessons

Consistency

If you have consistency and takes action everyday, you are just like person A. The action you took everyday will compound and finally become a huge snowball that makes things that are difficult at first seems much easier in the later stages.

If you are not consistent, you are like person B who always takes out his earnings every year. Every day when you decide that you will miss your work out or stop writing or marketing for your blog, you take out some of your “earnings”. Which means you are weakening the compounding effect.

It is just like running a blog. If you take action and write content and market your blog daily(consistency), you will reach a point where you do not need to put in so much effort to gain new subscribers and traffic(compounding effect). Ask any great bloggers out there when is their most difficult time and most of them will tell you that it is the starting part that is always the most difficult. It is because the compounding effect is not there to help them make things easier.

Persistency

What happens if person B gives up investing at the 5 year mark? His earnings will be much worse as compared to person A. In order to make things work, you will need to have the persistency to keep going no matter what.

I can see that there are a lot of people trying to make money online or start their work out with the aim of getting that washboard abs. However most of them gave up at the starting to middle phase. That is because things seems to be hard for them at that phase and it is human nature to avoid suffering.

One thing you should take note is that giving up is the only way that you will not reach the finishing line. It doesn’t matter if you sprint or walk, by just not giving up you will reach the finish line for sure.

Let me share with you one of my favorite quote by Confucius.

It does not matter how slowly you go as long as you do not stop.
Confucius

Are you using the power of compounding to your advantage? Are you regularly taking out your “earnings” and rob them of the chance to snow ball into something bigger?

Vincent
Fan Of Compounding Effect


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14 Responses to “What Everyone Ought To Know About The Power Of Compounding”

  1. Considerably, the article is in reality the greatest on this laudable topic. I concur with your conclusions and will thirstily look forward to your upcoming updates. Just saying thanks will not just be sufficient, for the exceptional lucidity in your writing. I will immediately grab your rss feed to stay abreast of any updates. Pleasant work and much success in your business enterprize!

  2. I always believed that consistency is the key to every success. And you have said the same thing, if one is compounding daily (with reference to blogging) then he will surely have no problem in tapping the estimated exposure to his blog, otherwise the possibility graph grows smaller after this.

    You have mentioned the right points thanks for the post.

  3. Mike Mott says:

    Picked this up off Warrior, thanks for the post.
    The only way is up.
    Regards
    Mike

  4. used tires says:

    As you might know, I am currently a university student, it’s funny that this topic of compounding I recently learned about in my Money and banking course that I have this semester. The lesson takeaway I learned is anyone can become a millionaire, as long as they start saving from an early age.

    Till then,

    Jean

  5. Buy PSP Go says:

    Great point, people often don’t understand the benefits of Compound Interest but hopefully you’ve opened a few eyes!

  6. Vincent says:

    Hi Neseret,

    Thanks for sharing my articles with others. 🙂

    Hi Steve,

    It seems like you did the right thing and all you need now is to allow the compounding magic to work. 🙂

    Hi Megan,

    Most people would love to have quick success. I am one of those too! However I know that success doesn’t happen overnight and I need to just keep my eyes on the goal and be persistence about achieving it.

    Hi Ian,

    Sometimes we need a little reminder about little things that are important and this is the part where HealthMoneySuccess comes into play.

    Hi Diggy,

    “Its about that perseverance, to keep going when it seems like you are making no progress.”

    You bet! It is always during this critical phrase that will decide whether we can become a winner or a loser. I love what you had said!

    Hi Oscar,

    I’m glad that it help to make things clearer.

    Cheers,
    Vincent

  7. Hey Vincent! Nice to see with those tables the difference between person a and person b. It helped me to understand a few things,

  8. Heya Vincent:)

    I also read about Warren Buffets love for compound interest, and it makes sense as you illustrated.

    It’s like with everything, initially the work far exceeds the result and reward, but over time, the work starts paying off, and then the results increase exponentially 🙂

    Its about that perseverance, to keep going when it seems like you are making no progress.

    Thanks for sharing 🙂

    Diggy

  9. Ian | Quantum Learning says:

    Great to be reminded of this and I like how you apply the principle to other things. It’s easy to forget sometimes when the initial path seems long and rocky!

  10. I’m glad I read this today. I was having a thought about my blog that has since been uprooted for the silly weed that it was.
    I’m learning that persistence pays off. I used to only want homerun-types of success and had this “go big or go home” mentality, yet that’s never how I was wired to play. I’m a long-distance runner at heart. Not fast, but tenacious.
    Your words hit my mind perfectly this evening. Thank you!

  11. I first learned of compounding years ago and have used it ever since to keep my savings tucked away using medium risk funds. great article Vincent.

  12. Neseret says:

    Thank you for writing a great article.

    I enjoyed reading it and have passed it on. Persistance and consistency in anything we do in life is important if we want to see good results.

    Success is determined by our willingness to focus on our goals and as you described it allowing the compounding effect to take place.

    Looking forward to learning more about you and reading more of your articles. Keep up the good work.

    Cheers!

    Ness,