Have you ever wondered, “Why is it that some people earn £50,000 per year, while others, who may not work as hard or be as smart, will have fun consistently earning over £500,000 per year? I mean they both have the same 24 hours in their day.
Albert Einstein once said that Compound Interest was the eighth wonder of the world. But did you know that everything that you do or don’t do also has the same powerful capabilities to compound – either for you or against you?
Let’s say that with an eight hour day, you are exerting “Effort” to do work for pay – as you would at a typical job. Let’s assume you earn £25/hr. and you work, putting forth “Effort,” for eight hours. You would get paid £200 for that day’s work – or “Effort.”
A seemingly dumb question would be, “Do you ever get paid again for that same day’s work?” The obvious answer would be, “Well of course not. I only get paid once for each hour that I work.” Well, that is the equivalent to getting 0% return on your money and how long would you let your retirement money work at 0%? In this example, what you got paid is all you will ever get for that block of time/effort! And, it is exactly what most hard working, intelligent, highly educated people do for 30 to 40 years of their working life, until they retire.
However, suppose there were other “Options” for exerting “Effort.” Suppose you choose to work a different way, over that same eight hour block of time, and earned the same £200 for that day’s work. But, because you chose a different way to exert “Effort,” the next day, you earn an additional £25. And, the day after that, you earn another £50, and the next day another £100, and the next day another £200, and so on – all from that one original eight hour block of time. You may say, “How can that happen?” It happened because you found a way that allows your “Effort” to compound over time. It’s not just the usual “one-time” pay out agreement for each block of time, with which most people are familiar.
Let’s compare some different “Effort Option” returns using the example that you are a “Writer” of books:
1. Get paid once to write a book for your employer – trading your hours for dollars and working as an “Employee” for a company (similar to getting 0% return on your “Effort”). You do some work and get paid for that work. Done! You do some more work and get paid for that work. Done! Etc…
2. Write books and get paid every time one is sold – a single passive income stream from each book written (similar to addition of passive “Simple Interest” on your “Effort”). You do work and get paid to write a book and again every time one is sold. No income limit!
3. Train other people to write books – get paid to train others, and get a percentage of all sales from all the books written by all the writers you trained. You do work and get paid many times, from multiple sources, for that work. No income limit!
4. Train people to train other people to write books – get paid to train others, and get a percentage of all sales, from all the books written by all the writers that you trained – both directly and indirectly. You do work and get paid many times from an exponentially increasing number of sources with no new work required from you! Unlimited returns!
The difference in return between option 1 and option 4 over a 30 to 40 year working period is almost incomprehensible, yet most intelligent, highly educated, hardworking people choose option 1, simply because they are unaware of option 4 and its incredible “Wealth Building” benefits.
We are all given 24 hours each day of our lives, to use any way we choose and all of our “Efforts” in everything that we do are compounding… for someone. In option 1, when we trade our time for money, our “Efforts” are actually compounding, not for us, but for our employer. In options 2 – 4 we start to get our “Efforts” compounding for us. So, one important question you may want to ask yourself is, “Are my ‘Efforts’ Effectively Compounding for me?”