Compounding is hailed as the secret sauce to financial success, and it is, but its power goes far beyond money. Whether networking or nurturing relationships, achieving personal goals, or growing your career, the power of compounding in life and money works its magic over time—for better or worse. The choices we make daily, no matter how small, stack up like blocks to shape the trajectory of our lives—especially its quality. I’m talking about how compounding can be a force for positive change and how negative compounding can derail our progress. Here we go.
Compounding Interest in Everyday Life (Episode 318)
I’ve mentioned the power of compounding beyond money in the last two episodes, so it’s clearly on my mind. It’s mostly talked about as it relates to money, but when applied to all areas of your life, it can have game-changing results. That’s why I think it should be talked about more outside the context of money. Compound interest is paying interest on both the money you started out with, the principal, and interest that is added to that initial balance over time. For example, let’s say you put $1,000 in your high-yield savings account with a 4% interest rate. Please note I said high-yield savings account, not a regular savings account. The interest compounds, and after a year, you’ll have $1,040. That is your initial deposit of $1,000 plus $40 in interest. If you add no other money to your account, the following year, you’ll have $1,081.60. That’s $1,040 at the end of your first year of savings and an additional $41.60 of accrued interest for the second year of savings. You took an action. In this case, you put money into your savings. Then, after you took action, compounding took over. In this example, it is interest that’s compounded.
What is Compounding?
A definition of compounding is “to add to.” Compounding interest is adding interest on interest. You start with a set amount of money and then you keep adding interest and more interest until you have a lot more money than you started with. That is, even if you don’t contribute any more money to your savings. That is a positive way to compound your money to build wealth and reach your goals. There are also ways to negatively compound your money leading you to have less money and never reach your goals. It’s called debt. Negative compounding interest is when you borrow money and have to pay interest on the money you borrowed. For example, let’s say you have a credit card that charges you 10% of every dollar you borrow if you charge $1,000 for a trip to the beach. At the end of the month, if you do not add any money to the debt or pay any money towards the debt, you will have $1,100 to pay back. That is the thousand bucks you borrowed plus $100. In the example I gave a minute ago, when you compound interest on your savings and do nothing, you have more money. If you compound interest on debt, you not only started out in the hole, you continue to loss more money when interest compounds on your debt. It’s not the direction you want to go in. It’s negative compounding. When it comes to compounding, you want it to improve your quality of life, not worsen it. You want to add more and more of the good. I want to give you some examples of ways to positively compound in your life.
Positive Compounding in Life and Money
Your Network and Friendships
Strong friendships are not built overnight. Regularly checking in, celebrating milestones, and being present during tough times compound into lifelong bonds. A small effort today can lead to a friend who’s there for you decades from now, not to mention just being there for them.
Building connections and maintaining professional relationships compound into a dynamic network that can open doors, offer guidance, and provide support throughout your career.
Spreading goodwill compounds for you and the people you give goodwill to. There doesn’t always have to be something in it for you. People take notice when you help out of the kindness of your heart when you have nothing to gain.
Marriage and Relationships
Consistent acts of kindness, open communication, and small moments of connection compound into a deep, enduring partnership. Over time, these investments in your relationship create a foundation that can weather any storm.
You are compounding to reach your goals together—whether they are financial, health, family or personal goals. The key here is to remember to compound together. It gets hard if only one person is taking small, consistent action. When you do it together, you can go further and faster.
Community
Giving back to your community—whether through volunteering, mentoring, or simple acts of kindness—builds a network of support and goodwill. These contributions compound into a stronger community that benefits everyone.
Goals
Breaking big goals into small, manageable steps and consistently working toward them compounds into remarkable achievements. Every step forward builds momentum and confidence.
When preparing to join the Air Force, I could not do a single push-up or run a mile. Spoiler alert: I did, in fact, qualify to join. To get there, I started by attempting to do one perfect push-up. The next day, I tried doing a perfect push and a so-so push-up. The next day, I tried to do one perfect push-up, one decent one, and a so-so pushup. Until I was able to do 20 perfect push-ups. I compounded my way to 20. I used the work I did on the first day to add to the second day until the goal was reached.
When you make you take on a big goal in small doses, it’s not so overwhelming. Laying bricks for an hour a day is a lot easier than trying to build Rome in a day.
Career and Business
In business, compounding shows up in consistent efforts to improve systems, market your business, and invest in your education and growth. Over time, these efforts result in sustainable growth, money, and success.
Small, consistent efforts at work, such as learning new skills, trying a new method or networking, compound into career advancement.
I consistently compound in my businesses. The little things I’ve done and built on year after year have gotten me to where I’m at. Spending 30 minutes a day reading about finance, marketing, or sales. Doing one thing a week to improve my website or social media. Reaching out to 10 new people a week to build my network. All those actions have compounded to more knowledge in personal finance and business. To a better website, social media, and a bigger network. It all adds up.
Health
Small daily habits like walking, drinking water, and doing meal prep compound into better health over the years. On the other hand, if you eat cinnamon rolls, pancakes, and a sausage biscuit every morning, it is going to compound into some serious health issues.
Don’t forget my perfect push-up example. You don’t have to walk about the door and run 10 miles, but if you can make the goal of walking for 15 minutes today and then walking 20 minutes tomorrow, you’re compounding your way to better health.
Mental Wealth
Investing in your mental health by practicing mindfulness, journaling, or seeking therapy compounds into resilience and emotional well-being. Sometimes, we forget to focus on ourselves in that way. A good example of that is self-talk.
Replacing negative thoughts with positive affirmations or at least a “you’re doing a great job” in your head compounds into greater self-esteem, confidence, and happiness. Over time, this can transform how you approach challenges and opportunities.
If you would not say it to a loved one or a coworker, you sure as heck should not be saying it to yourself. Would you walk into your boss’s office or tell a client “You suck?” I don’t think so. Would you tell your kid, “You’re never going to accomplish your goals or be successful?” Heck no, you won’t. Speak to yourself with love and respect. It will make a difference over time.
Education and Learning
Continuous learning, such as taking courses or reading regularly, compounds into long-term knowledge and skills. If you want to have a great understanding of personal finance and investing. Start by reading a book or website on the topic for 10 minutes. The next day, read for 20 minutes. Keep adding time and tasks each day until you have a wealth of knowledge on the subject.
Those are just some of the ways you can positively compound in life. You can also compound better time management, spiritual health, cleaning and organization.
Negative Compounding
Now, I want to talk about some things that can compound negatively in life. Positive compounding can transform your life for the better. Negative compounding can just as easily take you in the wrong direction. Actions that are self-sabotage.
Debt
I mentioned it earlier: debt. Unchecked spending and high-interest debt compound into financial stress and limited opportunities. You paint yourself into a corner. Facing your debt and making consistent efforts to pay it off can stop negative compounding. It will also greatly reduce your stress and free up your money for positive compounding.
Toxic Relationships
Allowing toxic relationships to persist compounds into emotional exhaustion and drags down your self-worth. You are a reflection of the company you keep. Setting boundaries and prioritizing healthy relationships is key. Surround yourself with people that lift you up, not drag you down.
Self-medicating with Food, Alcohol, or Drugs
It’s not a fun topic, but it has a devastating impact on the military and veteran community. Coping with food, alcohol, gambling, or drugs are unhealthy behaviors that compound into physical and emotional harm. Replacing these habits with healthier coping mechanisms like eating healthy, exercising, or talking with someone who understands your struggles can prevent long-term damage. Sometimes, to stop negative compounding, you need help understanding the best first steps to take. Reach out to someone or an organization that can help show you those first steps. People want to help, especially those in the same spot you’re in.
Keeping the Status Quo It’s not that keeping the status quo is moving in the wrong direction, but you’re also not moving in the right direction. You’re doing nothing. Sometimes, it feels safer not to make a change and stay right where you’re at but you can never reach your goals if you don’t start positively compounding something to get there. If you’re just getting by in your career but know you want more, a promotion or a bigger paycheck, staying the same isn’t going to get you there. If you want more out of a relationship but things are decent the way they are, you won’t get more if you don’t take steps to get there.
Small Steps Lead to Big Changes
The beauty of compounding is that it works in small, consistent increments. I want to leave you with some actionable steps to get the most out of compounding to your goals.
Start small
Choose one area of your life to focus on, such as saving $10 a week, complimenting a loved one daily or engaging with one post on LinkedIn a day to grow your network.
Be consistent
Remember, it’s not about perfection but persistence. Small efforts over time make a big impact. I couldn’t do 20 push-ups, but I could try to do them each day. The consistency got me across the finish line.
Reflect regularly
Take time to assess what’s compounding positively or negatively in your life. You might be taking action each day that is negatively compounding in your life and not realize it. Adjust accordingly.
Celebrate progress
Recognize and reward yourself for small wins along the way. Even if it’s just, saying it out loud in the mirror. It keeps the momentum going.
Wrapping Up the Power of Compounding in Everyday Life
Compounding in life and money is a powerful force. Taking small, intentional steps can build a life filled with strong relationships, financial stability, and personal growth. At the same time, being mindful of negative compounding ensures you steer clear of choices that could lead you off course. Every day, you have the opportunity to make choices that align with the life you want. If you start small and stay consistent, the power of compounding will take over and positively transform your life.
Resource From Compounding in Everyday Life Episode
- The Power of Saving with a Plan
- The Compound Effect by Darren Hardy
- The Magic of Thinking Big by
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