The compound effect: What is it and how do you use it?

Hands up who has a Kiwisaver account – hopefully many of you! 😊 The benefit of having a Kiwisaver account is that it only requires you to make small, regular payments but over a long period the total amount increases in a snowball-like effect, earning interest that compounds on itself. That is, the interest earns more interest so many times over; much more than the payments you made.

Have you thought about other ways you could harness this power of time to improve your life?  Such as...

• Reading a book for 15 minutes every day would be 7.5 hours a month plus the enjoyment or knowledge you get.

• Practising a musical instrument for 3 minutes a day would be 18 hours per year plus improving your playing.

• Meditating for 5 minutes a day would be 35 minutes a week less the mental pressure you have all the other hours.

The little things really do count. 

The problem is, we’re in too much of a hurry to be willing to let time do its work. We want to lose 10kg in a month. We want to have buff muscles for summer. We want to undo a lifetime of bad habits in 21 days and then think we're a failure when it falls apart.

HERE’S THE SQUEEZE

Small, regular activities are sustainable over a long period. Think about a new workout routine: the "shortcut" way is to throw yourself into a new gym workout, going once or twice a day.  But as soon as life happens, you miss a day, which slides into a few days and before you know it, you’re paying for a gym membership you don’t use.

How about committing to something you can do even on your worst day?

Such as: a 5-minute core workout.

Or running for 1 km.

Or meditating for 1 minute.

Or practising the guitar for just 3 minutes.

The minimals you do often are far more powerful than the maximals you do occasionally because they avoid overwhelm. The benefits you receive from small, regular investments of effort are so much more than the sum of time and effort you spend.

Think of it in reverse:

• You wouldn’t brush your teeth for 30 minutes just once a week. The benefit comes from brushing them for 2 minutes, twice a day.

• You wouldn’t eat all your meals for the week in one sitting.

Allowing time to do its work means you embed good habits and it gives you time to adjust to a world with that activity in it.

Time for:

• Your fingers to grow tough skin when playing the guitar.

• Your mind to get used to the activity of meditation.

• Your bones to grow strong enough to take the physical exertion you’re putting on them.

• Your brain to accept that doing a new activity is normal.

  
  

The best questions you can ask yourself are:

1. What is the thing I do every day (or multiple times a day) that negatively impacts me?  Reduce or remove that.

2. What is one thing I could do every day (or multiple times a day) that could positively impact me?  Do that.

In the retirement savings world, the best time to start is 20 years ago.  The next best time is now.  Start making small changes now, and you might be surprised how quickly the benefits start to compound.

Mauri ora / behold the sneeze of life