Compound interest is when the interest you earn on a balance in a savings or investing account is reinvested, earning you more interest. As a wise man once said, “Money makes money. And the money that money makes, makes money.”

The power of compounding comes from consistency.. 

DIPESH JOSHI

As we discussed consistency is the key to succesful life. If you haven’t read it yet,then check it here before you go into this new ride.

If you get one percent better each day for one year, you’ll end up thirty-seven times better by the time you’re done. Compound interest accelerates the growth of your savings and investments over time. Conversely, it also expands the debt balances you owe over time. Here’s everything you need to know about what Albert Einstein allegedly called the eighth wonder of the world.This is why small choices don’t make much of a difference at the time, but add up over the long-term.

I recently read the book at the compound effect by author Darren Hardy to understand what the compound effect is? Let’s play out a little scenario, now pretend someone offered you the following put in 30 minutes a day the same time every day to push your skills and show improvement at the end of the first week you’ll get $10 with a 10% raise at the end of each week if you consistently put in the time day after day or you were offered $5,000 to put in the same amount of time but you don’t need to do it on a consistent basis and you don’t need to improve your skills you can just use your existing skill set now which would you take?

Let’s say you took the first option and your friend takes the second. You start putting in a small amount of consistent work each day after an entire month of daily effort, you’ve made 51 dollars and one cent meanwhile your friend is cashed in a check for $5,000 after the second month your friend is rubbing it in your face.He just made $10,000 not needing to push himself and here you are working day after day for a petty hundred and twenty-five dollars 81 cents up at this point your family starts suggesting that you should take the other offer as it’s still on the table but you don’t get discouraged, you believe in what you’re doing and you know the hard work will pay off one day.

After the third month people are getting downright angry with you you’ve only made 235 dollars and 24 cents they think you’ve made a stupid decision and beg you just take the other offer but you ignore them and keep proceeding a year goes by, you only have fifteen thousand five hundred and forty-one dollars to your friends sixty thousand dollars.

He’s living a comfortable life and doesn’t really have a care in the world.Meanwhile people are openly ridiculing you for giving up such a great opportunity to make easy money only after 16 months have you made the same amount of money as your friends and family only have one thing to say it’s about damn time after 60 months of putting in the work day after day and receiving a 10% increase at the end of each week only now are you starting to see significant results the next month you make $40,000 in one month the month after that you make fifty nine thousand dollars.

At the end of that second year you have accumulated just over 2.2 million dollars an average of 1.1 million per year, to your friends 60,000 year your family and friends are dumbfounded.Your friend can’t help but think he’s missed out on something significant sure he’s comfortable with 60 grand a year but he’s filled with regret what the story illustrates is that small unsexy but smart decisions made consistently every day that are in alignment with your big vision lead to seemingly,incomprehensible and incredible results.

Compound interest and compounding can supercharge your savings and retirement potential. Successful compounding lets you use less of your own money to reach your goals. However, compounding can also work against you, like when high-interest credit card debt builds on itself over time. That’s why compounding is a powerful motivator to pay off your debts as soon as you can and start investing and saving your money early.

So be consistent with your habits and efforts, compounding comes automatically in your way. Enjoy the result slowly but definitely. See you later.