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Profiting From The Compound Effect In Your Life

Profiting From The Compound Effect In Your Life

Whether you like it or not, the compound effect is at work on your life at all times. You simply have the choice of whether you profit from it or use it to destroy your health, wealth, and relationships.

The compound effect is the idea that small actions build up over time. Imagine you had the choice of taking $1 million dollars right now or a single penny that doubled in value every day for 31 days. If you picked the penny, you’d have $10,737,418.24 on day 31… not a bad return.

However, the compound effect has much more far-reaching consequences than a nice story. It’s the fact that your daily habits add up to an amazing difference over time. And that’s the trap we have to avoid… and make the most of at the same time.

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The Fast Food Generation

We live in a world where most people expect instant gratification. That’s why there are so many diet books claiming you’ll lose ten pounds in just 3 minutes, and get rich quick schemes that promise you can push a button and make thousands of dollars a day.

They exist because we’ve been trained to want everything instantly. Why develop healthy eating and exercise habits when we can use a fad diet or just get the fat sucked out of us? Why work to build your wealth when you get become an instant millionaire buying a lottery ticket?

The reason is that instant gratification approach doesn’t work 99 times out of 100… or in the case of the lottery ticket a couple of million to one.

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The Real Way To Make More Money

If you want a proven formula for making more money it’s called the compound effect (also known as patience). It’s the fact that all the little actions we take will add up to big results over time.

Success is not actually about a herculean effort over a couple of months or a year. Every “overnight success” story you hear fails to mention the years spent preparing for the overnight success. The basketball player who practiced every day, the business owner who worked on their idea for years, or the property investor who spent their weekends looking for deals.

Make More Money With Very Little Effort

Results come from the small changes we make in our lives. If you want to make some extra money by starting a business, then you can quit your job, invest your life savings, and put everything on the line. Another option is to keep your job and build your business part-time until it replaces your income.

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Imagine if you decided to start a new business, invest in real estate, or invest in the stock market. If you dedicated just 1 hour a day to this new pursuit you would have invested 365 hours after a year and be well on your way. After 5 years that would be 1,825 hours that you’ve put towards building your extra income source.

Don’t think you have an hour? You can try learning on the commute to work instead of listening to the radio or cutting out an hour of TV/Internet a day. Everyone has the same 24 hours, and it’s up to you to choose where they get spent or invested.

How Your Results Compound

The time you invest in making more money will also compound. For the first couple of months with your new business, you’re not going to know anything and your results will probably reflect that. Yet, over time, you will work out which skills you need to improve and be able to focus on those.

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When Richard Branson invests an hour into his businesses, it is very different to the hour you invest. This is because he’s built years of experience and just understands business at a much higher level. However, he got there by doing his first business calls from a payphone, working from a basement, and figuring things out as he went along too.

Everyone Has To Start Somewhere

If you want to make more money, quit your job, or build a passive income, you need to start somewhere. The good news is that, with the internet, it’s very easy to get access to the information that you need and even start an online business in your spare time. All you have to do is put in your time, learn, and take action.

By deciding to start today, you will start to build up the compound effect for yourself. But don’t start chasing after get rich quick schemes or push-button solutions. Every time you change your strategy, you give up the momentum you’ve built with the compound effect.

Do your research and choose a path… then stick to it. Have patience, as you won’t start making huge amounts of money overnight (that’s just promised to sell you the get rich quick scheme). But with time and effort you can create an income that many people dream about and few people achieve.

More by this author

Craig Dewe

Craig founded Lifestyle Outlaws, with the belief that everyone should have the time, money and health to do what they want with life.

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Last Updated on January 21, 2020

How to Develop a Millionaire Mindset in 6 Simple Steps

How to Develop a Millionaire Mindset in 6 Simple Steps

We all like to dream about being financially wealthy. For most people though, it remains a dream and nothing more. Why is that?

It’s because most people don’t set their mind to achieving that goal. They might not be happy in their current situation but they’re comfortable – and comfort is one of the biggest enemies of growth.

How do you go about developing that millionaire mindset? By following these simple steps:

1. Focus On What You Want – And Take It!

So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”.

Millionaires play to win, not to avoid defeat.

This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

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2. Become Goal-Orientated

It’s almost impossible to achieve anything if you don’t set firm goals. Only lottery winners become millionaires overnight. By setting yourself attainable goals, you will get there eventually. Don’t try to get rich quickly — get rich slowly.

Let’s take the idea of making your first million dollars and expand on what kind of goals you might set to get there. Let’s also say you’re starting at a break-even position – you’re making enough to get by with a few luxuries, but nothing more.

Your goal for the first year can be having $10,000 in the bank within a year. It won’t be easy but it is doable. Next, you need to figure out the steps you need to take to achieve that goal.

Always look at ways to make growth before cutbacks. With that in mind, you might want to see if you can negotiate a pay rise with your boss, or if there’s another job out there that will pay better. You might be comfortable in your old job but remember, comfort stunts growth.

You may also have other skills outside of your workplace that you can monetize to boost your bank balance. Maybe you can design websites for people, at a fee of course, or make alterations to clothes.

If this is still not enough to make the money you need to save $10,000 in a year, then it’s time to look at cutbacks. Do you have a bunch of old junk that someone else might love? Sell it! Do you really need to spend $10 on your lunch everyday when you could make your own for a fraction of the cost?

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If you are to become a millionaire, you need to start accumulating money.

Here’re some tips to help you: How to Become Goal Oriented and Achieve More in Life

3. Don’t Spend Your Money – Invest It

The reason you need to accumulate money is for step three. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with becoming a millionaire. You’ll want to quit your regular job at some point.

Stop working for your money and make your money work for you.

Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

There’s not just the stock market — there’s also property, and your own education.

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4. Never Stop Learning

The best thing you can invest in is yourself.

Once most people leave the education system, they think their learning days are over. Well theirs might be, but yours shouldn’t be. Successful people continually learn and adapt.

Billionaire Warren Buffet estimates that he read at least 100 books on investing before he turned twenty. Most people never read another book after they’ve left school. Who would you rather be?

Learn everything you can about how economics works, how the stocks markets work, how they trend.

Learn new skills. If you have an interest in it, learn everything you can about it. You’d be surprised at how often, seemingly useless skills, can become extremely useful in the right situation.

Start developing the habit of learning continuously: How to Create a Habit of Continuous Learning for a Better You

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5. Think Big

While I advise to start off with small goals, you absolutely should have a big goal in mind. If you have a business idea, then that is your ultimate goal – to start that business and make a success of it. If you want to invest your way to millions of dollars and do little work other than research, then that is your big goal.

There is no shame in not achieving a big goal. If you run a business and aim to make $1 million profit in a year and “only” make $200,000, then you’re still significantly ahead of most people.

Aim for the stars, if you fail you’ll still be over the moon.

6. Enjoy the Attention

To be successful, you have to be willing to promote yourself and enjoy the attention to a certain extent. Now the attention doesn’t need to be on yourself, it could be on your brand, but attention definitely attracts money.

Never be embarrassed to get your name out there. That means finding a spotlight and being brave enough to step right up underneath it.

If you run a business, try contacting the local papers. You’d be surprised at how amenable they often are to running a story about you and your business, and it’s all free publicity.

Above all, remember: You control your own destiny. Push hard enough for anything and you’ll get it.

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Featured photo credit: Austin Distel via unsplash.com

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