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Compounding Interest Baby...

Every person has exactly,1440 minutes in the day. In those 1,440 minutes, we make countless decisions consciously and subconsciously. Each of those choices, each decision you make and act on is casting a vote for who are and will be, your new identity if you will.

In the book Atomic Habits by James Clear, he discusses the 1% rule. In this rule, he discusses how by improving something by just1% a day for a year, you will end up 37 times better than you were before! Just 1% adds up to big dividends in the future. Conversely, get 1% worse each day for one year you’ll decline to nearly 0! This rule highlights how seemingly insignificant changes and choices over a lifespan are the determining factors between who you are now and who you could be in the future. True success is meteoric, it is a slow-building byproduct of daily habits. Daily habits create compounding interest in the bank of whom you are becoming. Outcomes are the lagging measurement of daily actions and habits. For example, your net worth is the lagging measure of your financial habits. Clear quotes “Time magnifies the margin between success and failure. It will multiply whatever you feed it. The most powerful outcomes are delayed…this is the hallmark of any compounding process” and the accountant in me shivers at all this talk about margins, net worth and oooohhh goosebumps compounding interest!

Compounding interest in the financial world pertains to investments where you earn interest on interest. Where if you start out with say $1,000 and earn 1% interest in one year you will have $1,010. Then next year you will earn 1% on the $1,010 without changing anything. Flip that thought from investing money to investing in good habits and you see where that 1% change you make today will build off the 1% change you made yesterday!!! You make gains on the gains you already made and eventually you see big results! The kicker here is you must hang with those 1% changes to see the eventual results. It isn’t a get-rich-quick scheme it is a calculated choice to better yourself now for a better future.

A real-world example that instantly comes to mind is New Year’s Resolutions. January is the busiest time of year for gyms. If you have ever had a gym membership you know you absolutely DREAD January. Suddenly the gym is full of newbs. All the machines are taken, and you have to wait forever just to finish a set or hit the treadmill. Then by February, it is thinning out, by March it is back to normal. Why is this? People get all gung hoe about New Year Resolution, the whole New Year, New Me mindset sends people running to the gym with ideas of grandeur about the physical changes that they will see. Unfortunately, if you have spent much time at the gym, you also know that change is slow. Muscles do not form overnight, endurance doesn’t expand overnight, and pounds do not melt away in a few days. However, over time, if you keep at it. If you are diligent and put in the hour’s changes will come. Too many people don’t see the tangible results fast enough and just give up. In the book Atomic Habits, Clear uses an ice cube analogy. If you take an ice cube and hear it to 25 degrees, nothing really happens, if you heat it to 31 degrees nothing really happens, then you hit 32 degrees and the magic begins. The ice cube begins to melt. Now that one-degree change in and of itself wasn’t monumental, but it was one degree added to multiple degree increases that finally provided tangible action. Compounding interest baby!

What is something that you are doing now that you can do 1% better at? Are you starting a new business and you work on marketing for one hour a day, can you increase that by just 1% and spend a few extra minutes? Or can you cut one bad food from your diet, eat one more serving of vegetables, work out just 2 more minutes? What habits can you build on today to cast that vote for who you want to be in the future?

Don’t know where to start, which habit to grow first? Hop on over to our Goal Mapping series and work through where you want to be in 10 years and see if you find some inspiration for habits that you need to cultivate today! And, if you want someone to come alongside you in the process then let’s talk about all Tandem has to offer you!

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