Compound interest is like losing weight.
Losing weight requires you to change your eating patterns. You have to break habits and take on new ones, like exercising.
Then, after forcing a change in habits for a week, you look at yourself in the mirror. You still look exactly the same as before. You get discouraged and go back to your old ways, and nothing changes.
When losing weight, getting impatient and giving up too soon can be your worst enemy. When building wealth with compound interest, it’s no different.
In this video, I give you a simple technique to stay on track with your wealth building.
TIME, DISCIPLINE AND CONSISTENCY
Compound interest starts off slow and it requires consistent habits. Even after 4 years of making regular deposits to your account and no withdrawals, you still may not notice a blip.
But give it another 4 years and then another 4 years, and you will see the bigger returns start to happen.
Compound interest is a marathon, not a sprint. It takes time, discipline and consistency.
Warren Buffett consistently averaged 20% returns for 60–70 years of active investing. That’s the kind of time frame you have to be comfortable with if you plan on making millions with compound interest.
A SIMPLE TECHNIQUE FOR THE IMPATIENT
There are three essential ingredients to success with compound interest.
The first is discipline. You need to have the discipline to not withdraw from your account, or you’ll kill off the compound interest effect. Your interest payments will forever remain measly and your balance will stay stagnant.
The second ingredient is consistency. Make consistent deposits to your account to maximize your returns.
The final ingredient is time. Even with the discipline and consistency, you still won’t see big returns for a number of years. Be comfortable with this, and it only makes the discipline to not withdraw even more important.
If you find yourself prone to temptation, consider getting an account that penalizes you if you take out the principal.