Apply compounding to your life – Secret of creating a great financial life

POSTED BY nandish@jagoinvestor.com ON September 5, 2016 COMMENTS (57)

To create wealth, you have to first get in touch with the power of compounding. I am not just talking about the mathematical concept here, but making the “compounding” your way of life. You will understand what I am talking about as you move forward.

Today’s write-up is close to my heart.

It is not just an article, it is about someone experiencing breakthrough in his overall life. I thought of sharing some of the conversations we exchanged with one of our clients, because there is something important to learn from it and it has the power to strengthen your journey as an investor.

Power of Compounding in your life

What happens if you just improve by 1%?

Nothing !

Yes, nothing will happen to you if you improve your skills, attitude, salary, net worth, relationship by 1%, but when you improve it constantly by a small margin for a very long time? What happens if you do that for 365 days?

Then?

Here is what happens!

You bring a drastic change in any area because you are allowing the compounding to work there. See the image below …

Effect-of-compounding

Let me share an incident with a client where he emailed me about himself and how he wanted to improve. Below is the conversation. Please go through the full conversation till end.

Here is the first email, which hit my mailbox

Dear Nandish,

I am one of your financial planning clients and I would like you to coach me in the area of money. I am a competent person, have a solid work experience and also earn decent money each month but still my financial life is a mess”. Can you please help me find the solution to my problem?

I tried hard to get the answer but failed to crack this issue.

Thanks

XXXXXXX

And here was my Reply

Dear Client,

Thanks for writing to me and for showing trust in me. I may not have a readymade solution for your problem but I can surely help you to see your situation under a different light.

Before I suggest you anything I have a simple question to ask:

Question: Tell me how many areas in your life you have you been consistent with from last 5-10 years time?

In Service,

Nandish

To this the client replies back …

Dear Nandish,

I really can’t figure out any such area from my life where I have been consistent from last 5 – 7 years.

Let me know what I need to do now.

XXXXX

My Reply

Dear Client,

I invite you to look into your life and check for yourself, maybe what is missing in your life is the power of compounding, compounding as a way of life and not just mere as a concept. The majority of people know compounding only as a concept. There are very few who experience the real power of it.

The Situation you are into may sound like a mystery to you but in reality it is not.

Now, getting this insight is not enough and so I have an assignment for you for the Next 1 year.

Assignment:

If you really want to experience the power of compounding you will have to take-up 3 more areas along with the area of money. Compounding is all about expanding your capacity as a person and so it is important to pick some more areas. Pick any four areas in your life which are new to you and engaging with them will help you to practice the power of compounding for the Next 1 year.

I would like to hear back from your experience exactly after a year from now and not before that.

If you are game for this assignment let me know.

I want you to just not have amazing ideas but also focus on the action part and execute what you are thinking because only that action will bring the compounding into action, Check the image below and you will get what I am trying to say.

why-compunding-helps

Reply from client

Dear Nandish,

Thank you, coach. I am a game for this assignment.

My 4 areas

  1. Health: Will join gym and work with my trainer
  2. Music: I always wanted to learn Guitar but never started
  3. Quit Smoking: I would like to get rid of my smoking habit
  4. Money Management: Complete actions as per the plan and start my sip of 25k pm for next 1 year

Thanks, Nandish. Thanks for coaching me and for giving a sense of direction to my life. I will let you know my experience exactly after a year.

Thanks once again. Thanks a lot.

Excited Client

XXXXX

I then received his reply, exactly after a year.

Dear Nandish,

I am one of your most excited and enlightened Financial planning clients, remember you gave me an assignment 1 year back to practice the power of compounding.

Here is the assignment you gave me

Assignment:

If you really want to experience the power of compounding you will have to take-up 3 more areas along with the area of money. Compounding is all about expanding your capacity. Pick any four areas in your life which are new to you and engaging with them will help you to practice power of compounding for the Next 1 year

My Life has completely changed the day I started doing the assignment. I created a journal for all four areas and started to capture my experiences. Before I share about my assignment I just want to say I am extremely happy as an investor and in each and every area of my life.

Here are some of the highlights from each area:

  • Health: I joined the gym the very next day and the first thing I did was hired a personal trainer. I shared with him about my assignment and he chalked out a well designed 1-year exercise plan for me. We decided to exercise 5 Days a week along with a specific diet plan. The first month was tough to follow but I slowly daily exercise started to become an integral part of my life. My strength , stamina, and overall fitness have gone to a whole level in last 1 year. I would like to thank you and my personal trainer for getting me started.
  • Music: I joined the music school; again the first month was difficult. In the start, I could not even hold the guitar. I was not comfortable with the guitar and even the guitar was not comfortable with me. My Music sir always emphasizes on one word “PRACTICE”. My sir kept reminding me that practice leads to compounding and eventually it leads to mastery. I slowly started playing songs and now music really relaxes me from all the noise out in the world. I am so happy I got connected to music, it has taught me many things in last 1 year.
  • Quit Smoking: This was the hardest of the all. Initially, it looked impossible for me to quit smoking but I really wanted to get rid of my smoking habit and I started putting efforts. I decided not to hold the cigarette between my two fingers, no matter what. I also shared about my project with my friends and family members and they really supported me a lot in this area. My commitment to fitness and music also helped me a lot to get rid of my habit. I can now call myself a non-smoker. I am free, completely free from my habit of smoking and it feels great.
  • Personal finance: Happy to share all the personal finance actions that you suggested in the plan are complete. I took help of your team and completed all the required actions. I also started my sip as per the commitment I made. Today, my financial life is in sync with my dreams, goals, and aspirations. Thanks to you and your team for all the support and guidance. I realized that personal finance is all about actions; it is not about worrying about future or regretting about the past. I can say in this area things have shifted and things are moving in the right direction. I am happy in the area of money.

Thank you for assigning a wonderful project to me, I keep sharing with my team and other about the power of compounding and I keep getting people coming and sharing their results with me. Thank you for bringing the magic back into my life.

Conclusion

Can you see the real power that resides in the word “compounding”? It is not about how your money grows but how you grow as a person. Pick any 4 areas in your life and start engaging with them. The more you engage, the more you will grow in those areas. Don’t take only one area because one single area takes a back seat very easily.

Now tell me which area you want to improve and start working on improving it by 1% each day or even a week. Watch out this video below to get a more detailed idea on this

Many of you may be new to investing or equities do not get scared try out this assignment and see what happens after 1 year. Make power of compounding your way of life and don’t just know it as a concept. Do share your views in the comment section; most importantly I would like to hear about your 1 year project which will help you to practice power of compounding.

This article is written by Nandish Desai…

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57 replies on this article “Apply compounding to your life – Secret of creating a great financial life”

  1. Vikas Das says:

    Hi, very informative article.
    I am a prospective investor and was looking for profitable options to invest. I wanted your views about Peer to peer lending and is it a viable option to invest?

    1. We will soon write an article on that topic. Give us some time

  2. Wow that is interesting as those are some of my goals. I had actually learned to play the guitar when I was younger and finally got back into it through practice. Now I can play music for my family to sing together. It has been so much fun and was enabled by careful practice day to day.

    Fitness is so important to our overall well-being. Its all about energy – so getting proper exercise and sleep is very important. I have seen massive improvements in my professional life due to improvements in my fitness levels. Great post.

    1. Thanks for your comment PatientWealth

  3. Vaibhav says:

    Inspired !

  4. Siva says:

    Nandhish,
    Inspiring story.
    – Siva

  5. Nadeem says:

    Thanks a lot for this article. Elicit as well as elaborate. Power of compounding if implemented well is certainly a boon for investors. Will shrug off my laziness and get into action.

  6. Manoj says:

    I want to subscribe to jago investors emails

  7. Harleen says:

    Nicely written and really motivating. A simple yet an innovative way to explain the magic of compounding.

  8. Rajesh says:

    What I can say Manish and Nandish.. Am slowly fallen in Love with Jago Investor…this article s really an eye opener..u ll b the reason for biggest positive move in my life…I ll start implementing and let u know the results..

  9. Manish says:

    Article is correct but example is misguiding. Compare 1.01^365 and 1.02^365 which can be logical. Multiplying a number less than 1 will result in getting the number exponentially reduced. So this example(.99^365) of showing growth of money is absurd. How can a investment reduce exponentially over time just because 1% less is invested.

    Thanks,
    Manish

    1. We are not talking about money anywhere in this article Manish 🙂

  10. bhaskar says:

    An absolute eye opener. Every thing in life ofcorse deoends on consistency and practice. The difference between famous achievers and ordinary people is only this : consistent practice.
    Hats off to you for explaining this in such a simple and lucid way. The story you narated may change my life now.

    1. Thanks for your comment bhaskar

  11. Srinivas N says:

    Great article. It reminds me of my laziness. I am a regular reader of Jagoinvestor for last 4 years. Also signed up for 100meneyactions 2 years back but failed to take a single action. Now after reading this article, I feel like completeing each financial actions one by one.
    Thnaks

    1. Glad to know that Srinivas ..

  12. Amit says:

    Great article on power of compounding. We can improve a lot by this concept.

    1. Thanks for your comment Amit

  13. Santosh says:

    Thank a ton Nandish. I read the book “First Thing First” some time back. Though it does not talk about compounding, basic essence is the same. I am currently focusing on Gym (last 6 months but on and off and regular for 1 month), investment (regular for last 6 months), public speaking (regular for last 6 months). It feels great. Your article reinforces importance of consistency and in a much better way. Thanks for sharing such a life changing idea in such simple but powerful words.

    P.S.: (1.10^365 = 37.8) quote in my office cabin for last 6 months. 🙂

    1. Nandish Desai says:

      Santosh,

      Hire a fitness coach. I have one and it helps me to stay disciplined. Even Manish has a fitness coach and is absolutely consistent with his exercise

      1. Santosh says:

        Absolutely agreed!! I have hired my wife as coach 🙂 (enrolled her also in Gym a month back). Guess what, I am 88% regular now – 22 days out of 25 in last one month. It works as wonder and we also get some quality time together while commuting to and from Gym.

        1. Thats so wonderful 🙂

  14. Adithya says:

    Fantastic Article. I keep reading your article and inspired by you

    1. Nandish Desai says:

      Thanks and do share articles with your loved ones

    2. Thanks for your comment Adithya

  15. Samuel says:

    Dear Sir,

    I would like to talk to you or send you an email. My mobile is 09989027065; I live in Rajahmundry, Andhra Pradesh. Please let me how can I contact you or meet you in person. Thanks you.

  16. Venkatesh says:

    Wonderful article Nandish and Manish – lovely to read such real-life examples of transformation by simple means. I admire your ability to create a story for teaching key concepts to people.
    One more beautiful way to inculcate compounding can be found here – https://janav.wordpress.com/2015/10/03/lecture-notes-the-joys-of-compounding/

    I am very happy to share that both my wife and I started meditation as a way of life about an year ago (Last Dasara). It has been almost a year now, and we both consistently are now effortlessly involved in meditation for 75 – 90 minutes each day. Like the example shown above, initially it was difficult to concentrate for even 10 minutes, but now it is part of our life and it feels incomplete if we do not perform the kriyas each day.

    One more exercise that I had taken up several years ago (maybe 12 years ago…) was to leave each person that I interact with happier than he was earlier. I am very humbled to share that this has worked wonders and I have been able to do this consistently over 90% of the time, over the past 12 years. Of course, there have been colossal failures along the way, but more often than not, this is the context of each conversation.

    I guess I was (and have been) practicing compounding unconsciously, but I am glad to do that.

    Thanks for sharing a lovely article!
    regards,
    Venkatesh

    1. Thats really wonderful Venkatesh 🙂

      And great to know you have already experienced its power !

  17. ArunShankar says:

    This is one awesome article I have come across till date !! Power of compounding is a blessing if implemented. I am now going to identify 3 more areas along with my wealth generation for next one year.

    Thanks again !!

    1. Thanks for your comment ArunShankar

  18. SharadaYadav says:

    Thanks, Mr Nandish for such a wonderful concept you put forward. Though it is little nerve- shaking to commit, but for any achievement one has to do a commitment.
    Nice and thanks once again.

    1. Thanks for your comment SharadaYadav

  19. Ramesh says:

    Very nice article Nandish Sir.Before reading I assume power of compounding work’s in fiance but it is useful in other areas of life.
    Thanks

    1. Glad to know that Ramesh ..

  20. Vinay says:

    This is really an eye-opener for me.
    Mostly like general public I tend to focus much on PLANNING than on EXECUTION part. I will also like to be a game of compounding and would let you know my results exactly after 1 year.

    Thanks a ton for enlightening me!

    1. Sure, why not .. we will again write another article for you if you share your results with us 🙂

      Manish

  21. Parthasarathi says:

    Sir
    My monthly income Is rs. 90000. I am paying emi 16k for hbl. My house hold expense almost 22k. I am investing rs. 9k in mf. And saving in Ppf rs. 17000.
    Now I am planning to buy a car of rs. On road price 4.8 lac for which I am taking a car loan of rs. 2.7 lac .
    Sir my question is that it is justified for me.?
    Partha SARATHI CHAUDHURI

    1. Yes, I think given the numbers, you will be ok if you take that much loan !

      1. Parthasarathi says:

        Thank you sir.
        For few days I am going through this puzzle .no one give me right answer.

        1. Glad to know that Parthasarathi ..

    2. mihir says:

      Dear Partha SARATHI CHAUDHURI,

      Why are you fond of loans? You invest and get 8-10% pa and paying 12-15% pa towards loans. How does it make sense to you? Pay off your loans ASAP first.

  22. Hitesh says:

    A very nice article on power of compounding.i like rge way you stressed the impact of compounding not only on finance but on other things,as well

    1. Thanks for your comment Hitesh

  23. dilip says:

    Thanks a lot Nandish, for sharing this…

    1. Thanks for your comment dilip

  24. ashok says:

    Wow.. Fantastic article nandish.. This is very useful for me and i will try to teach this to my kids..

    1. Thanks for your comment ashok

      1. sapan says:

        Nice article, sir,

  25. Gaurav says:

    Very good article.

    1. Thanks for your comment Gaurav

  26. bhupendra says:

    Nice article,

    Shows exactly where most of the persons lacks – Execution part. And that to the person take the same thing on priority if its told by others, not decided by itself.

    Any webinar/programs in Nagpur, would be glad to participate.

    Thanks.

    1. Thanks 🙂

      Webinars happen online so you can join from anywhere, but we are not sure when it will happen for FREE for everyone . We do it regularly for our school members.

      1. bhupendra says:

        Eager to hear next scheduled webinar from your side.
        Thanks.

  27. Santanu says:

    Thanks Nandish for this useful article. Yes, compounding has real power with time. In case of investment one need to know the power of compounding and also stay invested for long to get the best return.

    1. Thanks for your comment Santanu

Comments are closed.

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