Compounding in life and compound interest - why does it matter?

As a CFO, I prepare annual budgets and forecasts. In this process, I’ve seen the effects of compound interest firsthand.

Did you know that if your capital grows by 5 percent per year for twelve years, it will grow by 80 percent over this time?

You probably heard of the marshmallow experiment. Kids were given a choice between eating a marshmallow right away or waiting 15 minutes and getting an extra marshmallow. Over time the researchers followed the kids who participated. They found a much higher success rate among those who had enough self-control to wait for the extra marshmallow. Those kids were compounding interest in a way, investing their time for the extra marshmallow.

We’re used to hearing about compound interest as a financial term, but it applies in so many other areas as well. Socially, professionally, and even as a metaphor for personal happiness.  Starting to play guitar and the age of 30 is much more difficult than learning at the age of 15, but it’s still much easier than waiting until you turn 40. The longer you work at something, the better you get. The earlier you start, the more time you have to invest.

This is also true of relationships. If you invest in your emotional partnership and nurture it daily, you’ll create a positive feedback loop. Cherish each other and never lose sight of the fact that a meaningful relationship is an extraordinary gift. It allows you to give and receive and grow. But it takes work and it also requires you to choose well when you decide who is worth investing your time and your love.

As you keep investing over time, the yield from your time and energy will keep compounding. Taste as much as possible of what this great world has to offer, but do it thoughtfully and with discipline, keeping your long-term goals in mind. As Jerzy Gregorek says, “Hard choices, easy life. Easy choices, hard life.”

So, think about what you want for yourself in 10 years. Whether you want to play sports, eat healthy, or have a meaningful relationship, make these choices intentionally and work steadily to achieve your goals. Avoid (as much as you can) going through your days on autopilot. Remind yourself of your dreams when you wake up each morning. Make opportunities to grow, and keep compounding your growth. To read more: https://lnkd.in/dmQJ3b44