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The Magic of Compounding

Compounding is when you continue to build on top of something, it grows, and its effect is magnified.

Habits – Character is built over time, not overnight. All of our decisions, big or little, compound together to form habits and build character. When we live by our values, our stress goes down and we live with fewer regrets.

Takeaway: Be intentional. Patience, self-control, and discipline are all qualities that great investors practice and have helped them excel when making long-term investments.

Tip: Jot down areas where you show those habits and compare them to the areas that need growth. Write down the steps you can start to take to build up those traits so they can show up in every area of your life.

Investing – The earlier you invest, the longer your money has to increase without any additional effort. Through compounded returns (how much you make), the money you earn is automatically multiplied by the money you already invested, so it grows faster.

Takeaway: Invest early. Don’t get stuck on the amount that you’re investing, just start!

Tip: Whether you’re investing $10, $100, or $1,000, that money will start to multiply and increase faster than you think. For example, if you start investing $100 a month at 21 years old in the stock market, you could earn an EXTRA $1,200 by 26 or $6,500 by 31 through compounding returns.*

Credit – Credit is the reputation you build based on trust and consistency. Banks and other lenders look at your credit score to decide whether to loan you money. Your compounding decisions on how money has been paid back in the past are reflected in your credit score.

Takeaway: It takes time to build credit. Credit isn’t scary and can be used to your advantage when used correctly. If you need a loan to purchase a property or start a business, having the option to borrow the money can be helpful.

Tip: You can start building credit by opening a credit card with a low monthly limit, using it to pay one monthly recurring expense, then paying it off at the end of the month. You can use it for your gas or even your Spotify account. The key is to start with a small amount that you can easily pay off to prove that you’re reliable over time.

*based on the average 10-year stock market return of 9.2% (Business Insider)

Kam Phillips

Author | Speaker | Financial & Emotional Wellness

Please email for speaking or workshop inquiries.

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