Why compounding is the eighth wonder of the world? How does compounding work?

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Why compound interest is the eighth wonder of the world?

Compound interest is the interest calculated on the initial principal as well as on the interest accumulated on it over the period.

In simple terms, it is the interest on interest and the initial principal. 

It may sound a tiny thing to you but the impact it has is huge.

It’s the biggest tool at human disposal, but yet most are oblivious to it.

First, let me paint a clear picture.

Simple Interest Vs Compound Interest.

With the data above, one can clearly make out that compound interest yields massive results in comparison to a meager simple interest. 

Also, I would like to bring to your knowledge that compound interest not only operates in money matters but is also manifested in every aspect of life- be it business, relationships, health, etc.

The best way to put it is by an example-

You have joined a gym. The very first day you could only do 5 push-ups. After 1 consistent month of gyming, you can perform 20 push-ups. After 6 months that number will go up to 50. You see how that 5 turned into 50.

Hitting the gym regularly won’t only give you a beautiful physique, but will also fill you up with confidence, which will exude a wonderful personality, and which will lead to more networking. More networking may lead you to better business opportunities.

This is the power of compounding. 

You see how the small decision of yours may lead you to a series of benefits.

It’s the little things that you have to alter, that will impact your life massively.

Let’s assume another scenario- You decide to read for an hour right before you go off to sleep.  This is a tiny change, but it will compound on to something great. Reading an hour will not only make you wise but also aid you in your sleep. If you sleep better, it not only will aid you in your health but will also help you to wake up energized. You’ll see the results in the long term.

Compound Interest is hard to notice in the short term but difficult to ignore in the long run. You just need to invest wisely.

The most imperative ingredient required for the compounding magic to happen in your life is Persistence. Compounding won’t work until you are regular pouring in efforts. 

The table showed the compounding happening at intervals of 1 year. 100 did not turn 34891.2 in a single year. Similarly, the results will take time and require consistency, but the wait is worth it. 

Make the most of this powerful force. Even if you decided to improve by 1% every day, do the math and see for yourself that after a year where you’ll be. 

                                      = (1.01)365

 = 37.78

Your small effort of 1% every day will give you a lifetime of benefit, an year later.

Wake up everyday determined to be better than yesterday.

Beware, compounding also works negatively in your life. If you are persistent with the negative things in your life, then your life will compound on to be mediocre. 

Many people complain about being fat. What they don’t realize is that that it took them months of devouring junk food and lack of physical exercise to be in this state. The deterioration kept compounding. One can’t blame the circumstances. 

Learn to take responsibility for your life.   

I would like to conclude this article with a quote- 

“Compound Interest is the eighth wonder of the world. One who understands it earns from it whereas one who doesn’t, pays for it. ”

– Albert Einstien

It’s all up to you. Do you want the magic to flow or be cursed with it?


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