Using Compound Interest to Improve Your Life

What do Benjamin Franklin, Albert Einstein, Warren Buffett, and Tony Robbins have in common? They all understand the powerful force of compound interest. Make it work for you, and you can amass a great amount of wealth. Working against you, it can put you in a hole. In finance, the power of compound interest is undeniable. This same powerful force can influence your life outside of finance: self-improvement.

“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

Albert Einstein

The Basics of Compound Interest

The idea of compound interest is simple: once interest on an investment is earned, you begin to make interest on that interest. Let’s say you decide to invest $1,000 with a 10% interest rate. In one year, you will have $1,100. Sounds good, right? Next year gets even better. Instead of earning $100 again, your 10% interest is now calculated on the $1,100. This means you get $110 in Year 2, bringing your total investment to $1,210. Year 3 will be even bigger. Year 4, bigger still. This increase in interest earned keeps increasing indefinitely as long you remain invested. After 10 years, your original investment of $1,000 would amount to nearly $2,600! That’s 2.6x the original investment. Pretty cool, huh?

What’s even cooler is that this same principle can be applied to self-improvement. Improvement, just like interest, is compounding. Each step in the right direction sets up more and more successes in the future. Take the 10% yearly improvement example: improve 10% each year for 10 years, and you will be roughly 2.6 times better than you were when you started! Sound like a lot? Think of it this way: 10% per year reduced to a daily rate is only 0.03% per day. If you can learn to improve by only 0.03% per day, you will see dramatic improvements in the long-run.

“What are the next steps in my journey for self-improvement?” you might ask. You can achieve this in many different ways. Below are some of my favorites:

Ideas for Self-Improvement

Reading for 30 Minutes a Day

Aside from making it easier to find cat toys on the internet, reading provides numerous benefits, including improved memory, enhanced critical thinking skills, and even preventing dementia. Reading also provides incredible insight and perspective. The great thinkers of history have made their private thoughts available to you. You just have to put in the work to hear them.

“An investment in knowledge pays the best interest.”

Benjamin Franklin

Exercising for 30 Minutes a Day

Everyone’s favorite subject: exercise. While it can be difficult to find the time and energy to exercise, it remains one of the most important aspects of personal health. If you’re at the office, take an afternoon break to walk around the block. If you are working from home, do some push-ups between Zoom calls. Anything to get your body moving will improve yourself.

“Good things come to those who sweat.”

Anonymous

Drinking Plenty of Water

This is one that I personally struggle with, and it’s probably the easiest one to do. The problem most people have, myself included, is remembering to drink water. Luckily for us, technology is there to rescue us. Apps like Hydro Coach, WaterMinder, and iHydrate make this simple. Drinking water leads to a healthier body and clearer mind as a result.

“In time and with water, everything changes.”

Leonardo da Vinci

Conclusion

Compounding improvements give you the best Return on Investment, or ROI, in life. This phrase is most often used in a monetary sense, investments in time and energy can also yield fantastic returns. Self-improvement is an investment: start thinking this way, and you’ll be amazed at the effects you see.

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