Finance

Capital management: Compound mentality

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As I’m in the process of developing my company, I’ve learned to internalize what I call a compound mentality. This idea comes from a book called The Compound Effect by Darren Hardy. The concept is: if you live a life of consistent development, rather than sporadic improvement, you will yield greater reward. It’s essentially the story of the tortoise and the hare, but in reference to money management and growth.

The reason I’m calling it a compound mentality is: this book inspired me to apply the compound effect to every aspect of my life. While money management is crucial to fulfilling your dreams, learning to apply the methods of consistent development to your relationships, your careers, and your fitness and health will set you up to live a more fulfilling and happy life.

We all have first hand experience with the results of the compound effect in our lives. However, we might not have been aware of them. For example, we all have that friend that is in really good shape. They didn’t get that way by waking up one morning and decided they were going to spontaneously lose weight and build muscle. No, they got into a routine of working out and eating healthy, consistently, for a period of time until the results came. The same thing happens in the opposite way. We also know that person that just seemed to gain weight since the last time we saw them. Again, it wasn’t a split second decision to gain weight. Rather, they had an unconscious consistency of eating the last few chips in the bag, or getting a refill on their sugary or alcoholic beverage of choice. If you do those things consistently for any amount of time, you will begin to see the results those actions create.

Our mentality should be one of awareness. We can’t simply drift through life and not expect things to happen! That would be crazy. We have to become more aware of the things that are effecting us.

You might be thinking, “well how can I become more aware of the things that are affecting me?”

Here are three steps I’d suggest you take as quickly as you can.

1. Get a copy of The Compound Effect by Darren Hardy. (this article is not a paid endorsement, just an amazing book)

2. Find someone 8-10 years farther ahead in life than you. We all need a mentor who can walk with us and teach us along the way.

3. Start recognizing the compound effect with your personal finances. It’s the easiest one to observe and change. Do this by observing the little things you spend money on by writing down every purchase you make in a pocket sized journal. (you’ll see more about why in the book!)

 

Follow the Author on Twitter: @AronRailey

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