Have you heard about the power of compounding? Let me ask you a question to demonstrate this power:
You have a choice. You can work for $1,000 a day for the next 20 days OR you can work for just $1 a day for the next 20 days but compounding by double each day. Which do you want? Make a decision before reading on.
Let’s see how the two options work out:
1) 20 days @ $1,000 a day = $20,000.
2) 20 days @ $1 a day compounding by double =
Day 1 = $1, Day 2 = $2, Day 3 = $4, Day 4 = $8, Day 5 = $16, Day 6 = $32, Day 7 = $64, Day 8 = $128, Day 9 = $256, Day 10 = $512
Had enough yet? After all if you’d gone with the first option you’d have $10,000 by now not $512!!! You can switch back to first option now if you wish… But let’s see what would happen if you stuck with it:
Day 11 = $1024, Day 12 = $2048, Day 13 = $4096, Day 14 = $8192, Day 15 = $16,384, Day 16 = $32,768, Day 17 = $65,536, Day 18 = $131,072, Day 19 = $262,144,
DAY 20 = $524,288.
I bet you would have been quite tempted to pull out at day 15 ($16,384) wouldn’t you? But you were only five steps to $524,288!
Don’t reward success by undoing accomplishments.
It’s the equivalent of sticking to a diet so well that you reward yourself with a huge piece of chocolate cake! You know the power of compounding, so let’s make it work in your daily life.
Anyone for Marshmallows?
During the 1960’s an interesting experiment was conducted with most conclusive and revealing results. On the Stamford University Campus, Psychologist Dr Walter Mischel tested a class of four-year olds and then tracked them periodically through their lives.
The experiment itself was simple. The class of youngsters were presented with a single marshmallow each by their teacher and then given a choice. They could have another marshmallow upon his return if they waited patiently for him to do an errand.
Alternatively, they could have only that one marshmallow, but they could have it now if they didn’t want to wait. They were left alone in the room then with their single marshmallow while the teacher left the room for fifteen minutes. Some children covered their eyes or sung to distract themselves, while others gave in and simply ate the marshmallow.
Those children that still had not eaten their marshmallow upon the teacher’s return, were rewarded with a second. Many years later, the children that had waited were compared to those that hadn’t and the results were dramatic. Those that had waited were generally far more successful in every aspect of their lives.
It’s not too late for you to adopt a new concept in the way you live in order to get you to your freedom figure.
I call this concept ‘pleasure postponement’.
In other words, the ability to delay indulging yourself today so that you may indulge yourself twice as much tomorrow.
An example of pleasure postponement is that of full-time study for a qualification to further your career- it may mean that in the short-term you are not as well-off as your counterparts who are in employment, but in the long-term, you will be better off than them because of your studies.
The wealthy are disciplined. To get to where they are, they temporarily postponed certain pleasures to create even more pleasure in the future. That future comes round quicker than you may think and those disciplined people who are able to keep their hands off the single marshmallow, are soon able to enjoy their two marshmallow reward.
Meanwhile, those that chose to simply grab the marshmallow as soon as it was offered, look in envy at the ‘lucky’ people with two marshmallows and become bitter about this (they then probably vote for politicians that offer to steal marshmallows by force from people with ‘too many’ and redistribute them).
You need to have the clarity and focus to see this through without giving in to pressure. When you see friends and family buying new cars and clothes etc, will you be able to resist not joining in? Or do you have the depth of character to think single-mindedly about the long-term goal?
The majority have such little personal power, the only way they can cheer up their dreary lives is to spend money (usually borrowed money) on a load of consumer junk for comfort that will no doubt be found on the scrap-heap or a yard sale soon after. When I think about the thousands of dollars I wasted in this way I could cry……
The wealthy spend relatively little because they have discovered the value of money the hard way! If you look at the backgrounds behind the most wealthy 100 people in the USA, you will see that the majority started off with nothing.
You see, once you liberate yourself from the need to work and start to live a fulfilled and happy life doing the things you actually want to, you won’t need the comforting that buying loads of consumer junk gives you.
Don’t confuse lifestyle with wealth. Big incomes and big lifestyles don’t necessarily mean that you are actually worth very much. What’s the point in earning $100,000 a year if you owe $105,000? Many of the world’s millionaires live below their means.
It is one of life’s little ironies that many of our trivial longings and so-called pleasures are substitutes for deeper longings.
And I wonder, are Americans finally realizing this with this sudden change in our spending habits?
The government is begging people to spend again, printing money and engaging in an all-out taxation assault, but while politicians still act like children, maybe ‘their’ people are growing up.
I hope so.
Until next time,
Kevin Raymond
