scott stonehouse

“Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.” – attributed to Albert Einstein, but I couldn’t find evidence that he actually said it. Whether he said it or not, it is still true.

A little bit of money saved at an average rate of return over a long period of time becomes a lot of money.

For example, savings $100 a month for 40 years earning a 10% annual rate of return would grow to be over $531,000.

That is significantly more than the $48,000 that was actually saved.

Compounding can work against us if the money is what we owe and the interest is what we are being charged.

This is why compound interest is so powerful.

The thing is, it applies to more than just money.

The principle of compounding applies to our actions.

Consistently doing things aligned with our values and goals over time really pays off. For example, exercising, eating well, investing time with friends, working on a hobby, or developing new skills.

Consistently doing things not aligned with our values and goals over time can seriously harm us. For example, being stressed, eating junk food, drinking alcohol in excess, or gambling.

And the consistent compounding makes it easier to do whatever we are doing, whether that is good or bad.

Time is going to multiply whatever we do. Our actions will compound.

The questions are what actions will be multiplied? and will that be something that helps us or hurts us?

Will time and our habits be the best of servants or the worst of masters?

They will be one or the other.

Although this can be a cause for concern – and perhaps it should be – it doesn’t have to be. This can be a source of great encouragement, strength, and hope.

We tend to overestimate what we can do in the short term, but underestimate what we can do in the long term.

So think longer term.

If we can keep this in mind, that time will multiply what we feed it, then we can have confidence that if we keep putting in good work it will pay off.

Keep practicing.
Keep studying.
Keep walking.
Keep spending time together.
Keep experimenting.
Keep trying.

It will be worth it.

You can do it.

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