Git Gelt Episode 7: How Compounding Shapes Your Finances and Your Life

it's really compounding the compounding effect is not only in money it's with everything in life you know I I want to do exercise and you know what's the big deal of starting tomorrow maybe I'll start tomorrow maybe I'll start next week it was also the same as the 20th day it was not different this is compounding but we only see the the the the feeling of it and the excitement of it we only see the last the 20th day the 30th day but if you if you think that you're going to skimp on the foundation and just put up the house you're left with nothing so some people don't go on a diet because they don't know how to lose 100 PB they only know how how to lose 5 lbs famous slogans is one day at a time get the wisdom for [Music] your sh good to see you again how nice to see you again yes so a question that came in that uh I think we should talk about it is somebody is asking us to speak more about compound interest um it's it's it's known to be one of the Miracles in the world I think Albert Einstein said that it's the miracle it called it the miracle of compound interest and somebody asked if we can talk more about it so let's dedicate a little time to talk about it all right um and the thing is I want to start with a lot of people when it comes to to compounding they associate interest to compounding and it's very understandable why because it's you know it's known as the miracle of compound interest but really it's not so much about compound interest it's about anything in life and it reminds me of a uh podcast I listen to today it's a podcast I listen uh very often to this podcast and this guy was talking about his business that he he has a certain you know way of doing business that he changes a lot I understand why there's a certain nature that some people have that they want to you know they they get excited about changes they get excited about something new to to keep changing and he's a fairly successful guy but he he complains or he claims that because of the nature of always trying to find the next think you know you can call it the ex tiny object but they don't want to call it that way because he's successful so he has a lot of is going very well for him most people who run after the next shiny object are failing and are not successful but he's very successful I'm a multi-millionaire and he is a few successful businesses and probably a few businesses that he started that didn't work out right so the way I I love the way that he framed it he said like this he was complaining that I have this exciting thing that I'm always looking for the next the next interesting idea the next uh whatever I don't remember exact words but he's looking for the next interesting thing so when he finally he starts doing this and he starts seeing that it works already he is like putting it on autopilot and letting it uh be let letting it uh do its thing and then he go goes for the next thing and because of that he complains I'm losing the power of compounding okay and I thought it's fast fting because it's really compounding the compounding effect is not only in money it's with everything in life and I give you an example with diet for example a lot of a lot of people when it comes to let's say exercise okay let's talk about exercise you think about exercise and the way you think about it is that you know I I want to do exercise and you know what's the big deal of starting tomorrow maybe I'll start tomorrow maybe I'll start next week and it's the the problem with it is that you don't have that could be it's not a big deal from today to tomorrow now but it is a big deal later on from 20 years or 20 years in a day right and and if if you give me if you allow me I will explain what I mean I will show you something that I think I find it fascinating let me ask you before I show it to you if you take a penny a day if you take one penny not a penny a day if you take one penny and you multiply it and you double it for the next 30 days how much will you have in 30 days from now I don't know but I imagine it's gonna be a big number you want to take a guess it's not you know nothing will happen if you're not gonna give me the right a thousand a thousand a thousand pennies 1,000 pennies yeah how about 5,368 79 in 30 days in 30 days wow so again what am I trying to do well you're just doubling each day the amount that you have second day I have two pennies third day I have four pennies then eight pennies and I'll give it to you how it is 1 2 4 8 16 32 by day 10 we have $512 by day 15 we have $163 by day 20 we have $5,245 day 25 167,000 and day 30 5,368 okay now this is fascinating so when you go from day 29 to day 30 the same you know you only double once a day you go from 29 to 30 it's a difference of about $2 and a half million they one it's only a difference of one penny so people understand that the last day is very very important but sometimes people don't understand that the first day is also important and the reason for that is because you can't have the 29th and the 30th day if you don't have day one first so it's it's as important right and and and the same works in the reverse we don't realize how when we make one small little misjudgment or mistake or or or or or lack of doing something how that compounds itself well in the other direction exactly the you go on the highway and you you go off the wrong exit so you still have time to get back on but if you stay on that way within an hour you could be miles and miles away from your inial from your original destination Absolutely I'll give you another example that happened to me the last few weeks I think it's it's it's amazing example for me it worked crazy and and and through the power of compounding I got through that you know I just wrote my book you know the the book I wrote you know you success the key to your succcess and I recorded the book I wanted to have an audio book because I hate reading books I love listening to books and I thought maybe my my clientele is the same and I it turns out that they are the same so most people buy the audio book not the paper book and I didn't have too much patience recording it I got to tell you the truth I love you know once I was in it I I loved it but to get to it and then to re-record and then sometimes you know from time to time the mic starts scratching and I have to rerecord that part and and I wanted to record it with my original tone with my original passion I didn't want to just read a book I'm I'm I'm listening to a lot of audio books and most of the audio books I read it you know you can hear somebody reading a script I don't I don't like it that much I like to read to listen to audio books where the the the author is narrating the book and it gives us his passion his original passion and very few books are like that that's one of the reasons that I wanted to record it myself now what happened was that I'm recording the English book you know I I told you I wrote it in Yiddish and in English and the yish book I recorded many many weeks ago and and now I'm finishing recording the English book so I remember when I recorded the yish book in the beginning it was I had a big gu saidar you know well maybe today you're not going to record maybe you record tomorrow today you're such a such a busy day and you know I had to really really be disciplined to do it and the first few days of me it took took me a few weeks to record it so the first few days that I that I recorded it myar was more much much stronger so let's say for example that I need to take 20 days recording and let's say that I'm recording let's say uh 20 Pages a day just for an example you know or 10 pages a day I'm thinking to myself it's a 220 page book 250 page book so the first day okay big deal it's 20 Pages let's say it's 10 pages a day big deal okay tomorrow I will I will I will I will get start I will record again and this is what happened the first few days then the last three four days I had such excitement to see that I'm almost by the finish line that it was much easier for me because I saw big big progress every day for the last few days you almost finished you almost finished you almost finished wow and it get gave me excitement to to to do it but then I Happ the that the first day was also the same as the 20th day it was not different if I wouldn't have the first day completed I would probably have to do it for 21 days not for 20 days so that means that the first day is just as important as the 21st day right has the same impact so so so now I'm recording the English book and I'm thinking to myself I'm I have such a busy day maybe I should I should not record today I should record tomorrow but then I'm reminded oh wait a minute you remember the feeling you had the 20th day this feeling is not going to happen the 20th day it's going to happen the 21st day if you delay the day from today if you delay today's date so this is compounding but only see the the the the feeling of it and the excitement of it we only see the last the 20th day the 30th day and you you need to have a lot of discipline in the beginning in order to to the first day that it's only one penny to two pennies is as important as the theory of day where it's another $ two2 and a half million dollar right I get it so you're triggering a couple questions in my mind first before you ask your questions the example I gave you makes sense in this context yeah because every piece you know you end up you look at a beautiful house but you have to understand that the foundation That You Don't See is just as much a part of that and it take you have to spend just as much time and effort and thought and investment in that foundation in order to get that beautiful house in the end but if you if you think that you're going to skimp on the foundation and just put up the house you're left with nothing so everything requires this compounding you know in order to have a true y to really have well-built Foundation in order to have the outcome it requires Good Foundations but those foundations take time and you're not going to see the benefits of the gmak of those foundations until the actual house is built like you said it requires discipline and I think we see this across the board not just in money but in all aspects of Our Lives I mean exercising is a perfect example you know I went on a real strong exercise campaign this past literally a year ago in January I decided I'm committing myself to really exercise and lose weight and you know it's so difficult in the first few months because you don't see the weight coming off the exercising is difficult you're not you're not used to it it's not it's a schlep and it's just like it's it be so much easier to just pick up a Cofe and go home and and and you know and and and sit in my chair and come up with a plenty of excuses I'll learn more Tyra I'm gonna spend more time with my family but you have to also realize that if you don't make this effort now you're not going to be able to spend time with your family in 10 years from now you're not going to be up to it abolutely and you know and you're not going to fit in your clothes anymore and all the other things that happen that come with not making so I I totally get I think everybody who's honest with themselves will recognize what you're saying is just so obvious and simple but the what what what occurs in my mind is number one you know as important as it is to acknowledge the value of compounding not not just in our lives in money and everything but clearly we we we're we have an aversion to it we we don't want to do it and and my number one question is as important as it is to recognize the value of compound we also have to hear from you how do we address those yaras how do we address those things the the obstacles that are getting in our way of just you know focusing on on on on what needs to be done that discipline and number two I do think it's fair to say there's a difference between the example of um recording your book as opposed to doubling your penny over the course of a month because at the end of the day recording your book is in your control that is something you can you you own that you can you control that but doubling your money there's so many external elements that are going to affect your ability to actually double that Penny every day it it's it's it's it's it it you know we need to understand how to get from the same way I can control my ability and take ownership things that are that I have control over how do I how does that how does that translate into money how how do we can exercise so let's talk about it okay so for let's take exercise for example I I love the example you brought on with exercise I think it's an excellent example would you agree with me scham that if you exercise every day for the next 10 years in 10 years it's going to be a piece of cake for you you're not going to have to think twice you're just going to go exercise absolutely not even 10 years wasin within within several months you already feel like that right I once heard from somebody that somebody who exercises for six months diligently will not g is not going to be able to live without exercise for the rest of his life even even if he's GNA take breaks he's gonna still have to exercise every you know every every day I can absolutely testify personally to that because I've seen it happen to myself so that's for sure that I I know and I saw it by myself too but let me ask you something are you able to get let's say it's six months if you exercise for 6 months regularly religiously you're it's going to be a piece of cake for you let's say okay let's just as an example so everybody wants to be at the point where where you get at six months the problem is in order to get to that point you have to go through six months of hardship or challenges or discipline or you know fight with your and get get out and exercise get to the gym do whatever you have to so I think to myself today it's so hard for me to go exercise today I'm not going to do it I'm going to do it tomorrow after 6 months yeah I'll will do it every day because going to be a piece of cake the problem is you can't get to the six months only without being very very disciplined for the first six months you can't so in other words the first day that you exercise and you fight with your uh inclination of not going to exercise you think you you you it's it's a fight that's going to go on forever and I'm going my rest the rest of my life I'm going to have to fight like that no you invest ing something in order to have the have The Compound Effect that you can have after six months now when it comes to money we're talking about doubling your money every day for 30 days this is not to say that you can double your money every day this is not the point even if you make 8% a year 10% a year that that the point is that there is a compound effect that once you get your finances ready to experience the comp The Compound Effect it's going to be it's going to be you know you're G to love it the problem is to get to that point you have to be very disciplined in the beginning even though you don't see too much as the example you said building the foundation You're Building underground nobody knows what's going on people in the outside think oh for six months they're not building here it's not true they are building but they're building the foundation they're building the electricity system the pluming system people from the outside don't see it all of a sudden you start doing the Cosmetics outside and people say oh wow now they start moving it's not true they were moving all all along you just didn't see it but but the point is the point the point is also that that that doesn't mean let's go back to the example of the one penny doubling every day for 30 days the challenge that you have day one is different than the challenge you have day 29 day one you have a challenge of doubling a penny big deal I don't have to do anything for that I just have to reach out put in my hand in the other pocket and take out another Penny that's simple but in day 29 you have to to come up with $2 and half million it's a different Challenge and usually people will not get to day will not go through day one because they don't know how to deal with challenge day 29 which is a big problem because once you get to day 29 you will have to figure out how to deal with the challenges with day 29 you don't have to deal with it now you have to deal deal with it then and then you're going to most probably figure out how to deal with it based on the challenges you have in day 29 and this is in every area of life I think it goes back to a conversation we had you know a few podcasts ago about somebody who doesn't save any money because he doesn't know where to invest it who cares where to invest it just start day one do whatever you have to right so are so you're saying that some people hesitate from saving money because they're afraid of what's going to be 30 days from now give you an example some people don't go on a diet because they don't know how to lose 10000 pound they only know how how to lose five pounds interesting who but who cares you you you do what you have to do today and when you get to that point we'll deal with it then I once heard somebody saying jump down from the roof the the the wings are going to come on the way yeah yeah well I mean that's you know in in these 12-step programs where people who you know participate in these programs where they the supportive environment when whether it's people having trouble all kinds of different trouble but they have 12 steps that they go go through that they're working on and you know one of the famous slogans is one day at a time you know you just just take it don't look at what's going to be how div CL is going to be over the next six months or a year just think about today today you're gonna invest money to one day at a time and one step at a time one step at a time and and so so let's talk about let's talk about for example saving money you know that by this and this in this point your goal is to have enough money to marry off your children for example so in order to to get there from let's say we're talking about a 20- year period from year 19 to year 20 it's a big difference very big difference could be let's say that you need $100,000 could very well be that five of the 10 of the $100,000 you need will come in year number 20 right so it's going to get from from from 19 and a from from uh90 sorry from $95,000 to $100,000 in year 20 but year one could be it's going to be only $1,000 that it's going to go up your account and then you think to yourself okay big deal it's only $1,000 I'll start next year because this year I have blah blah blah blah blah it's not true because your step in the right direction in year one is what gets you that in year 19 to 20 you should be able to get that result right yeah and and and I I hear from you and I this is consistent consistent throughout all the different things that you've spoken about and so much of being successful and financially it really is determined by your mindset you you have to have a mindset a committed mindset to to being willing to to to to make these things happen and and and and to to recognize that there going to be challenges but if you have the the mindset of commitment and and and recognizing this is what I want to make happen you know these other these other challenges are going to be addressed right I want to tell you something very funny yeah let me ask you a question first how many zidas and Babas do you have going back 10 years take a guess throw out the number 10 years yes I mean I had four I mean personally I had four four two Bubbies and two zes right yeah but I'm talking about great grandparents but then you okay for the past 10 gener not 10 years I'm sorry 10 Generations oh oh oh oh oh I mean there could be I don't even know I mean it could be 20 30 how about millions in 10 Generations yes okay let's count let's let's count together so you have four right each of your four grandparents have also four so that means you have to double it every generation uhuh four * 4 am I right no just a second so four four time four is how much 16 16 so it's not double it's more than double then you need 16 * 4 how much is 16 * 4 4 I'm so happy I have you on the show because I I needed somebody who's good at math 64 64 so we're holding at uh two generations no no the third the generation number 364 generation number number four 64 * 4 is 256 okay number five is 1,24 number six is I have a calculator don't don't don't think I'm number six is 4,096 number seven is 16,384 number eight is 65,536 number nine is 262,144 number 10 is a milion 48 milion 48,000 schan fredman has 1,48 , 576 zidas and bubas over the past 10 Generations wow can you imagine okay now full disclosure it doesn't mean it's a million 48 different zabas could be that a few of them are multiple times here Z okay but you didn't when I when I made this calculation when I saw this one penny a day doubling for 20 for 30 days I made this calculation about zidas and Babas and I was fascinated yeah wow imagine 20 Generations you're talking about millions and millions it's incredible and and and like you said from the beginning this this is across the board in every aspect of tell you something else if you think about somebody uh you think about any Jew any Jew from 10 Generations ago very very big chance that he's us Baba or Baba you talk about 20 years ago even bigger chance you talk about the the you know the any Jew that is not a convert is is not a g most probably all of them area some way shape or form wow all the way through the marish he is for sure right yeah yeah sure but that that's incredible wow so it's the impact that we have everything we do has such an immense impact that's really something I wanted to mention you talked about how as much as much of the challenge as it may be to get something started it can be just as challenging to you know to get to the end because the end can be just as as as as concerning how we G how am I going to actually make this happen I once heard from shinberg shalam you know he says say th tell us KES right I don't understand when I start something it's always fresh it's exciting I'm running to go when I'm gonna make it he says I when I I find it to finish something is difficult that's where the what's what's he said no is when we start something we have to start it with a commitment to see it through to the end no matter what that type of commitment that's ker wow that's where it's difficult and that's what I think you're saying that we need this mindset that we're going to commit ourselves and it's going to be difficult but we're going to see it through and if we can develop that mindset then we can we can to all these incredible you know compounds absolutely and I love I love that shot because I can relate to that and and most of the people who don't accomplish too much is because they don't get to the finish line and it's it's a shame you know you know how many books I started writing and I didn't finish it but I did now I finish but a lot of things people start and they don't finish so it's so important and usually uh but I still think some people have the the they're scared of starting something because they think they're not going to finish it so start and finish and let's celebrate together your success but let's you know let's not forget that we were talking about compound interest in finance it goes on to in everything in life start and finish and know that the small step today is part of the big big step on the anend maybe you don't see it yet I am the okay that's okay we'll finish with this today and have a wonderful day we'll be in touch [Music] okay get down the wisdom for your wealth