Power of Compounding

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

compounding imageYes, you heard it right. These words were quoted some generations back, but it is as modern as today’s technology. I am sure, it isn’t that difficult to understand from the financial aspect, but the real problem has been, it’s awareness and it requires discipline to implement. That’s why there are very few on this planet that have been able to understand this concept and not to mention they have been reaping benefits, as a receiver from ages.

We are highly driven by our tendency to focus on complex things and unfortunately that goes with our finances too. Having said that, we are lured to get rich quickly methods, we fall for some fancy taglines without realizing what’s the real deal. This makes us vulnerable and we pay for our lack of understanding. I am not being antagonist and there are some really good financial opportunities available, however, it is the question of identifying the right one or else things get complex and we end up bearing the dead stock or a dead investment in the process. On the other hand the concept of compounding or earning compound interest is very simple, it does not require too much of thinking and can be easily planned.

PatienceAnother aspect is our short-lived patience, corresponding to the ill-effects of this fast paced world. Today we look at devices to help us almost on everything, we are stationed at one place, but things work around us, round the clock. Perhaps we could have such devices, created to stabilize our patience level as well because compounding is the pure product of patience.

If I go by what Albert Einstein said, I was on the payer’s side earlier, because I lacked understanding then and did not realize what compounding can do for me, but now I am in transition of becoming a receiver. I believe that money can never be enough for anyone of us, there is no end or limit that we can bring in our purview and label it saying,” this is enough”. You always would want to have another zero attached to the figure that you have or earn today.

So what did I do to make it work for me?, I decided to play with my apprehension for things and especially for money, I understand my spending habit too well, If I have got 100 bucks in my pocket I will ensure to do everything and anything to spend till the last penny lasts. However I knew this would not go for long, Hence, to make it work, I decided to set a certain percentage of money aside every month, ideally a very minimal amount that. Next thing I did was to have this amount removed from my bank account on the 1st of every month the moment I get paid like I never earned it. Similarly I created two more such buckets (investment plans) which comes from renowned financial institutions and they provide all the service to my doorstep, literally there is nothing I need to do it, All I have gotta do is ask. Sometimes you got to play with your mind like I said small things do not matter for the majority of us, especially when it comes to money. So setting up your investment in small buckets is helping me and I don’t feel the pain of parting away with the huge sum of money at one time. But it gradually set to grow into a big amount. The wealth created in this process is without taking any risk,

Now it has been several months, although I am a novice, I intend to continue this run for a long-term until these small buckets become large bath tubs compounding over the years to come. Well, it does not stop there. The reason is, these small investments are mostly in the form of recurring deposits or variable deposits termed for a certain period of time. You can rely on banks to create it for you and it does not require too much of an effort, you just have to give them consent for automating such transactions and they shall be happy to execute it. Finally, once your investments or savings matures added with the considerable sum of interest, you would have a decent amount of money to set it for real compounding. And the real compounding is to set that accumulated amount in the form of fixed deposit for several years and see your money growing. You have got the right to achieve your financial freedom
In case if you think, you are too weak to stay disciplined to let your money compound this way, you can ask your organization for some help. Now a days, in fact, many organization have introduced different schemes or fund where they compulsory deduct certain percentage of money from your salary which goes towards these funds, it follows the same principle of compounding and the best part is that you are not allowed to withdraw it for immediate use, it is only when you change the organization or after certain stipulated time frame like 5 yrs or so, you are entitled to receive it.

Dear Readers, I hope you enjoyed reading it, more than that I wish if it serves to be useful. Mostly, my source of information always has been the books that I read. This time, it came from, Tony Robbins, a strategist (that’s what he calls himself). He has recently written a book named ‘Money:  Master The Game – 7 Simple Steps to Financial Freedom’. The steps mentioned in this book are very simple to follow and the outcome is certainly awesome. Possibly you may have heard about him if not then I would recommend getting your copies today off the shelf or enrolling yourself to his seminars. He is a successful man, when I say successful; it is not because of the money he has made, but the kind of work he has been doing to make human lives better. His principles or rather his strategies on various subjects can be used at any stage of your life. All you need is the power to decide for yourselves because he believes that as humans we are gifted to choose and decide. According to him, Man’s destiny is shaped from the moment he decides. My life has changed largely by adopting his techniques and I am sure this would work at any given situation.

Note: My intention is not to demean or disregard your saving methods but to draw your attention what is available in your hands and easy to start.