Everything in Life Compounds
I introduce the idea of how compound interest - traditionally a financial concept, applies to all aspects of our lives. Knowing this can improve your life.
One of my earlier articles was a beginners guide to compound interest. In the article, I explained the compounding effect as "interest on interest". Compound interest is exponential and not linear, meaning the next £, $ or € is easier to earn than the first - this is the power of compounding.
I also explained that the length of time you're saving for is equally as important, if not more important than the amount you save.
Consistency over a long time is key to any success.
We "earn" compound interest in all aspects of our lives. It applies to everything and not just our savings. We can benefit from "compound interests" in our; relationships, careers, education, health, fitness — everything — every single aspect of our lives.
When you see someone with a fantastic relationship with their friends or family, you don't appreciate the amount of time they have spent in developing and nurturing these relationships. All you see is the end result - an awesome relationship.
The more you save, the easier it becomes to maintain a good saving habit. Over time, your savings compound and the results are spectacular.
Similarly, the more you actively work on a relationship, the more trust you build into the relationship, the easier that relationship becomes to maintain and the better the quality of that relationship. You've built a solid foundation and can enjoy the returns from the hard work you've put in.
You do not notice the benefits of having a healthy diet on the first day of your new diet. It's a lifestyle. It takes consistency over a long time to truly experience the benefits of living a healthy lifestyle.
Consistency over a long time can also work against you when it comes to bad habits. For example, people who are always complaining and moaning about something tend to be negative people. They expend a lot of time and energy on being negative. Over the long term, they become very good at being negative people.
Good and bad habits compound over time and what we consistently do over a long time determines our success in life. We become experts at whatever it is we do daily - be it good or bad.
It's easier to make money if you already have money. Similarly, it's easier for you to maintain good health if you are already healthy. It's easier for you to become fitter if you're already fit. It's easier for you to maintain a good relationship if you already have a good relationship.
You get the point. The hard part is getting started. Once you begin working at a specific aspect of your life, you reach a point where the benefits quickly start to snowball. Take a look at a compound interest graph to see what I mean. The results are barely noticeable initially, with incrememtal gains despite you generally working harder at the start. However, the results begin to compound and become more pronounced over time, providing you remain consistent. The result is exponential and not linear. There's a snowball effect to the results that makes it easier to progress the more you keep at it.
Have you notice that it's always the people who already have great relationships that continue to spend the time to nurture and develop their relationships (despite not needing to), whereas those who need to spend the time nurturing their relationship rarely do.
Similarly, it's those who are already wealthy that continue to save (despite not needing to), whereas the less well off are less likely to save. It's those who are already fit and in shape that gets up at 6 each morning for a run and not those who are overweight and desperately in need of a workout.
The more time we spend doing something, the easier it gets and the better we become at the activity. Spend more time running, and you will become a better runner. Spend more of your time to studying, and you will become a better student.
It sounds easy, and we already know this. Yet, it's the simple things that are often most difficult for us to incorporate into our lives.
To truly change your life for the better, you need to remain consistent over a long time. It's the things we do consistently that compounds into spectacular results over the long term. It is why maintaining good habits is vital as our habits can work both for and against us.
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