May the force be with you. Especially if that force is the power of compound interest.
Even a small amount of money, if earning interest and given enough time, will eventually become a mighty sum. It’s a much better play than burying money in a metal can under a maple tree. The hard part is getting started because it takes a while to notice any momentum and it’s more gratifying to spend those dollars on something you can enjoy NOW.
Only recently have I realized the power of compound interest extends beyond the financial realm.
When I was in my twenties, I regretted not being able to put money into the market. I knew that the sooner you started, the more powerful the result of compound interest. But any extra dollars we had went back into our little business – and funded our primary diet of ramen noodles and Hamburger Helper.
Instead of investing in other people’s businesses through the stock market, we invested in our own instead. It was a riskier play, but it did offer more control. Alas, we did lose money the first several years. Earning a hundred dollars felt like moving a Mack truck out of a mud hole by hand back then, but we persisted.
Making a living and buying a lake house was always the dream, but back then it seemed downright preposterous when something like needing new brakes on our ancient jalopy felt like a death blow.
I’m typing this now from my dream studio in my dream home, overlooking the Great Lake known as Michigan. It didn’t materialize from money made in the stock market, but compound interest definitely played a part.
Before we made it here, Kim and I spent twenty years putting good into the world. We persisted when common sense indicated otherwise. Day by day, week by week, month by month, we slowly built up our network, learned new skills, developed tiny habits, and earned goodwill from a steadily growing tribe of Adultitis Fighters.
I was surprised as anyone when we were able to buy our dream house in the middle of a pandemic that, when it started, threatened to be a death knell to our business. When the shock wore off (let’s be honest, it hasn’t fully yet), I realized how it happened:
Everything we’d been doing for twenty years — and the lessons we learned — added up and turned into a snowball with real momentum. It’s what carried us through the pandemic, landed us this lake home, and helped us weather the straight-line wind that took out 150 trees and destroyed our backyard this summer.
Sadly, I personally know people who are no further along in life than they were twenty years ago, financially or otherwise. It’s not because they aren’t intelligent or that they were unlucky. It’s because they didn’t stick to anything long enough. When things got hard, they bailed. When someone wronged them, they retaliated and burned a bridge. When something didn’t show results fast enough, they packed up and moved on to the next thing.
It’s true that if you put five dollars into the stock market every day for twenty years, your life will be transformed.
But that’s not the only way to take advantage of compound interest.
If you tell one person a day about that thing you made and have for sale, your life will be transformed.
If you walked for twenty minutes a day for twenty years, your life will be transformed.
If you write a thank you note every day for twenty years, your life will be transformed.
If you read a new book every week for twenty years, your life will be transformed.
If you do a random act of kindness every day for twenty years, your life will be transformed.
A few years ago, we finally started making enough money to actually invest some of it in the stock market. I expect in another twenty years it will serve us well. But I won’t have to wait until then to understand and appreciate the effects of compound interest.
Wherever you are on your journey, carry on. Pivot if you must, but persist.
Take advantage of compound interest.
Over time, even the tiniest steps add up.