We all know the principle of compound interest. Well if you take the formula of how the interest starts to add up due to interest being charged on interest then we can see that there is a positive angle to this too.
Really, there is a positive to paying more on top of what we owe?
Nope, I haven’t gone crazy; I’m talking about the principles of compounding.
The theory is simple: Every action we do doesn’t necessarily have an immediate output i.e. you won’t see the results straight away. In the long-term though it will however have a massive effect.
Lets take a training or gym analogy.
If you are unfit and start training 5 days a week, the only thing you will notice in the immediate term is the pain of your muscles! You won’t see any results. The first couple of weeks will seem like torture.
Then fast forward to week 4 or 5 and visible signs start to appear, fitness levels have increased and generally all-round you are feeling good. Wait till week 10 you will be amazed!
The reality here is that you have not done anything different each of the 5 days. It is the compounding effect of doing it and doing it consistently.
Bad eating habits won’t reflect immediately but wait for 5 years. Small investments will not return great wealth but in 20 years time there will be a sizeable pot. You get the picture.
Small, consistent, repetitive actions will produce exponentially larger returns, good or bad.
Set up a regime, stick to it and watch what happens in the not too distant future.
BL
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