Understand The Power of Compounding and Compound Interest

Many benefits in life come from compounding; whether it be in money, relationships, love, health, activities, or habits. In my study of wealthy people that created it themselves, I have noticed that they all have used the power of compounding in some form or another. Whether that measure of wealth is in emotional, physical, or financial terms they have utilized the power of momentum or the power of compounding. A person physically wealthy doesn’t eat healthy just 1 day out of 30. They also don’t workout every 60 days and then take another 2 months off. Those same consistency principles apply to building wealth financially. Wealth financially comes from money compounding on money or by the compounding of the value that you deliver to the world. We are trained to believe that time and money have a linear relationship that is necessary. However, wealth is created by the breaking of the time and money relationship. That relationship is a mental construct that isn’t useful. As an example, the model of going to college for 4, 8, or 12 years and then getting hired by someone to work 40 to 80 hours a week to earn an income is not a wealth creation model directly. Indirectly though, I have seen people invest their earned income into assets that don’t have a time/money relationship to compound their way to wealth.

There is an exponential growth of compound interest versus the linear growth of trading time for money. This is not a knock on trading time for money. Many self-made wealthy people trade time for money for a little while to save up to be able to utilize the power of compounding.

Here is a chart that illustrates the power of compounding. The key is to get started. Get started saving so the benefits of compounding can really work for you 10-30 years from now.

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