The power of compounding

Photo by Edward Howell on Unsplash

Most people have heard about the power of compounding when it comes to investing. Tony Robbins’ example is a good one:

Joe begins investing $300 in the stock market every month from age 19 to 27, saving a total of $28,000. Bob does the same, but from age 27 to 65, for a total of $140,000. The stock market in this example grows 10% annually, a number chosen for its simplicity. By age 65, Joe has $1,863,287 and Bob has $1,589,733.

I think that if I would have heard that when I was younger, I would most likely have started saving more money a lot earlier. At school, they told us we should save money, sure. But they didn’t have a compelling reason, it was more like “so you have money when you get older”. If I would have known about compounding interest, and that I could be a millionaire when I retire just by saving $300 every month for 8 years, I’m pretty sure I would have done it. And I guess we would have a lot more millionaires in general if more people would see and understand this example.

Compounding health

I like to think about health in the same way. Obviously, we can’t “get healthy” from age 19 to 27, then stop and pick it back up at age 65. But think about your health the same way as investing, each “healthy” thing we do adds to that sum we invest every month.

Here, we also get dividends along the way. If we think about COVID-19, the majority of people (excluding seniors) being in the intensive care unit and dying were/are obese. “Healthy people” also handled the whole situation with the economy slowing down, places shutting down, etc. better. But it doesn’t have to be that dramatic, a more simple example could be brushing your teeth: you brush them twice every day so you don’t have to go to the dentist and fix them every year.

You won’t get a sixpack after one workout, and you won’t get fat if you eat “bad” every now and then — it’s compounding these things that give us the results we want (or don’t want).

Compounding the wrong things

After losing a few close ones to cancer, I’ve been studying the topic quite a lot. The common thing in most cases is compounding something bad, like eating bad food or smoking, for many years (I know I know there are other kinds of cancers as well). When they hear that they have got cancer, they feel like they are the unfortunate ones and that this happened to them out of nowhere. They go through chemotherapy and/or operation and hope everything will be fine, but they immediately go back to doing those things that got them there in the first place.

This is a touchy topic, so I won’t go any deeper. The point is, do something bad repeatedly and you can expect bad outcomes. I’m no doctor, but just with a quick Google search, I can find a lot of things that can cause cancer so I know that I shouldn’t consume those things daily. Of course, you should enjoy things you like, but remember to keep a balance. Drinking 8 sodas every day will probably not have a good outcome, so cut it down to 1–2 per week. It’s difficult, but comparing it to getting cancer, I guess it’s an easy choice to make.

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Andreas Westerlund

Andreas Westerlund

Endurance athlete, digital nomad, nerd. Just a normal guy trying to figure out fitness, business, and life. https://www.andreaswesterlund.com