Compounding interest is when your interest earns interest. It’s the growth on your previous growth. It applies to so much more than just your investments and credit cards.
Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it. — Albert Einstein
Snowball — Imagine a small, 3 inch snowball rolling across the snow. The small snowball picks up snow slowly (interest) with each roll. The snowball grows to 2x, 3x, 4x… The newly collected snow (interest) allows the snowball to pick up even more snow as it moves across the snow.
Now, imagine this snowball is your knowledge of a particular subject or your relationship with a close friend or your blog’s audience. Make small investments in these areas and watch your growth compound.
Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it. — Warren Buffett
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” Warren Buffett