If you were given the choice, would you rather have $1,000,000 cash right now or would you rather have a penny that doubled every day for 30 days?

If you chose the million dollars, that’s great – you just got a fat stack of bills.

But, if you decided to take the penny that doubled each day, let’s take a look and see what that would look like compounded over 30 days.

On the 8^th day you would have only had $1.28, but on the 30^th day, you would have had over five million dollars. That is the power of the compound effect.

While this compounding effect will work for you if you are investing or if you’re in business for yourself, it can also just as easily work against you if you are in debt. In the same way that your earnings can compound for you, the money you owe can compound against you as well.

A real-world example of the compound effect in action

As illustrated by Darren Hardy in The Compound Effect, if you bought a $4.00 coffee every single day for 20 years, it would end up costing you a total of $51,833.79. No, that was not a typo – a $4.00 coffee per day will end up costing you a total of $51,883.79 in 20 years.

This is because for every dollar you spend today, it is costing you nearly five dollars in only twenty years and nearly ten dollars in thirty years. If you took a dollar and invested it at 8 percent now, in twenty years, that dollar would be worth almost five dollars. In thirty years, that dollar would then be worth nearly 10 dollars. So, in other words, every time you spend a dollar today, it’s like you are taking five dollars out of your pocket twenty years from now.

Alright, no more numbers

That was a lot of numbers, I know. Let’s change gears. If this compounding effect works with finances, could it also work with your health, relationships, happiness, success, etc.? The answer is yes.

As another example, let’s say there are three guys – Zach, Brian, and John. They all live pretty similar lives working during the day and then spending their evenings with their families. Now let’s say Zach starts reading every day and going to the gym 4 times a week, Brian maintains his same normal routine, and John decides to start having a couple beers every day after work while watching Netflix in his recliner. After only a few days, there would not be any noticeable difference between the three guys. After a few weeks of this same routine for all three guys, there still wouldn’t really be any noticeable difference. After a few months of this though, you may start to notice some differences between them. Zach, since he has been reading and working out, just earned a raise at his job due to what he’s learned from the books he’s been reading, and he seems to have a lot more energy during the day. John’s health begins to noticeably suffer, and he seems to have a lack of energy during the day. If this same process continues on for a few years, there would be massive differences between the three guys.

Small actions repeated consistently over a large period of time will produce drastic results – in any area of your life. If you go to the gym one time do you expect to see major gains? No. But what if you went to the gym 4 times a week consistently for several months, would you see some results then? Absolutely. What if you stopped going to the gym? You would no longer see results.

What about your relationships? In the same way that it takes years to develop trust with someone, trust can just as easily be destroyed in only a day once this compound effect is broken.

Fall in love with the process

Society today glamorizes celebrities, rappers, professional athletes and the like – but no one ever considers all of the work that they had to put in consistently for years and years to get there. Behind every professional athlete is countless hours of blood, sweat, and tears on and off the court. Behind every successful rapper is countless sleepless nights staying up rapping and writing lyrics. One thing they all have in common though is that they embraced the process – they fell in love with it. It’s never cute or popular to stay in and invest in yourself and your business when all of your friends are out partying, but everyone wants to be wealthy. No one wants to spend hours in the gym, but everyone wants to be fit. Everyone wants to live a life different from the masses, but everyone is so content on fitting in with the masses. If you decide you are willing and able to commit to taking small steps to guarantee a better future for yourself and your loved ones, it will not be easy. Fall in love with the grind as success never comes overnight. You may not even see any results for a while.

One of the best ways to stay committed to yourself is to figure out “your why” – why do you want to improve a certain area of your life? Maybe you’d like to be able to spend more time with family, maybe you’d like to travel the world, maybe you’d like to buy a few cars with cash, maybe you’d like to have money set aside to be able to donate to charity, or maybe you just want the peace of mind of never having to worry about finances. Once you understand your why, commit to taking those smalls steps each day to put yourself in a position to win and let the compound effect do its magic.

Additional reading

The book mentioned above, The Compound Effect, is a great resource if you’d like to read more on this. You may also find value in checking out these books below:

1. The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change
2. Extreme Ownership: How U.S. Navy SEALs Lead and Win (New Edition)
3. The Power of Habit: Why We Do What We Do in Life and Business

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