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If I were a rich man… *sing the rest in your own head*

On one hand, I’m not a rich man, at least not in the traditional financial sense.

On the other hand… I do have lots of non-monetary riches in my life, and financially, well… I’m OK.

The reason I’m OK? COMPOUNDING!

Yes, welcome to the amazing world of compounding—the magic that turns pennies into palaces, dreams into reality, and ordinary folks into financial Bezos’ and Buffett’s.

And as Tevye says: “And may the Lord smite me with that curse!”

Like the snowball that gathers momentum and size as it rumbles down a hillside, compounding of money is a powerful and useful force that almost anyone can take advantage of… me and you included.

I’ve never achieved the heights of income earning. I made a respectable salary during my lab career but nothing that would catapult me into the high-flying atmosphere of the 1%! Compounding has been my bosom buddy for many years…

See yourself standing at the edge of a vast financial landscape, the sun casting golden rays on your eager face. The air crackles with possibility, and the wind whispers secrets of abundance.

Compounding isn’t just a financial concept; it’s a cosmic force—an invisible hand that nudges your money toward greatness. (CAVEAT: yonder taxman is also a cosmic force!)

It’s the reason why your spare change can evolve into a treasure chest. So, brethren, grab your compass (or smartphone, because it’s 2024), and let’s traipse this terrain together.

I bequeath to you 8 Commandments of Compounding (no mountain climbing required):

1. Thou Shalt Begin Early and Stay Consistent

Imagine compounding as thy loyal friend who loves to party. The earlier you invite it to the fiesta, the wilder the celebration becomes. So, throw the financial confetti into the air and start investing today. Whether you’re 22, 42, even 62… the magic of compounding works best when it has time to groove.

Action Step: Set up monthly automatic contributions to thine investment accounts. Even if it’s just a modest amount, consistency is the key to unlocking compounding’s full potential.

2. Thou Shalt Honour the Rule of 72: Doubling Delight

Whisper the sacred number- 72. It’s like a secret handshake among savvy investors. Here’s how it works: Divide 72 by thine annual interest rate return (in percentage), and voilà! You get the approximate number of years it takes for your money to double. A penny doubled over 27 times gives you a $1,000,000.

Example: If you’re earning 8% annually, your money will double in approximately 9 years (72 ÷ 8 = 9).

Action Step: Find your favourite calculator (or just Google it) and play around with different interest rates. Witness the magic unfold, even while you’re asleep.

3. Thou Shalt Frequent the Cosmic Dance Floor: The Compounding Frequency Dance

Picture this: Thy money is throwing a dance party, and the DJ is spinning records labeled “Daily,” “Monthly,” and “Annually.” The more frequent the beats drop, the crazier the dance floor gets. Choose investments that compound frequently (monthly or daily) for maximum groove.

Action Step: Explore investment options with high-frequency compounding. Thy money will be doing the cha-cha while others are still waltzing.

4. Thou Shalt Reinvest Dividends Like a Boss

Dividends are like little love notes from thine investments. Instead of cashing them out, whisper encouragement ie. reinvest them. Think of it as giving your money to a pet rabbit: “Hey, buddy, go forth and make more babies and multiply!” In a few months you have a field of bunnies.

Action Step: Set up dividend reinvestment plans (DRIPs) wherever possible. Your future self will thank thee with a virtual high-five.

5. Thou Shalt Cultivate Bonsai Patience

Compounding is like growing a bonsai tree. It starts small, but with time, it becomes a masterpiece. Don’t panic during market downturns; they’re just plot twists in thy financial novel. Stay patient, water thy investments, and watch them flourish.

Action Step: When the market throws a tantrum, resist the urge to panic-sell. Instead, sip some green tea, breathe, and trust the process.

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6. Thou Shalt Diversify Like a Gourmet Buffet

Imagine thine investment portfolio as a gourmet buffet. You’ve got stocks, bonds, real estate, and maybe a sprinkle of crypto (if you, unlike me, understand what the heck that is?!), a feast of flavours. Diversification ensures you don’t end up with a plate full of croutons. Mix it up, my friend!

Action Step: Review your portfolio. Are you missing any delicious investment enrichments? Spice things up by adding a pinch of international stocks or a dash of alternative assets.

7. Thou Shalt Celebrate Milestones (With Real Cake)

Every financial milestone deserves a celebration. When thine investments hit a significant number—whether it’s $10,000, $100,000, or a bajillion dollars—throw a mini party. Buy yourself a cupcake or dance in thy living room. You’ve earned it!

Action Step: Set specific financial goals and celebrate each one. Remember, life is too short to skip cake (or ice cream, or chocolate).

8. Thou Shalt Leave a Legacy of Generosity

And last, but maybe most important… remember, compounding isn’t just about accumulating wealth for thyself; it’s about creating a ripple effect.

When thy financial tree bears fruit, share it with others. Whether it’s supporting a cause you believe in, helping a friend start their investment journey, or leaving a charitable legacy, generosity amplifies the magic of compounding. Sharing like this does wonders for your mental health… that’s a big bonus!

Action Step: Set aside a portion of thy gains for giving back. Your wealth isn’t only measured in dollars; it’s measured in impact.

So fellow seeker, go forth! Let these commandments guide thy steps.

May compounding be thy compass, leading thee toward abundance and joy.

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