The Eighth Wonder of The World

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Here at Steward Journal and beyond, we are attempting to understand and utilize the stewardship principle of compounding. Compound interest refers to earning money on your money. It’s like a farmer who has one apple seed: he plants it, nurtures it, until finally he gets his first apple. At this point, the farmer has options. He can eat the fruit and throw away the seed, or he can use the fruit to grow more trees: apples growing apples. Each apple produces more seeds that can be planted, which in turn produce more fruit that can be used to bless others.

In a similar fashion, compound interest is like planting, saving seed, and expanding your production using last year’s produce. It’s like raising chickens, and instead of eating all the eggs, you hatch out more chickens which in turn, give you more eggs. Then instead of eating all of those eggs, you continue hatching out chickens, until your barns are full, and the people call you blessed.

When it comes to finances, the results are spectacular. If we are disciplined in our investing and use time as an ally rather than an enemy, then eventually we start seeing the results. Below is a table showing the gains from compounding $100,000 for 10-30 years at a rate between 4%-16 %. If you invested $100,000 today and received 4% per year and reinvested that payment, after 10 years you would have a gain shown in the upper left. If you invested the same amount but received 16% ever year, and held it for 30 years, you would have a gain shown in the bottom right.

This requires a disciplined following of a simple formula. What makes the formula difficult, is its simplicity. The formula is as follows: live below you means, invest the difference. Do that for 30 years, and your results will be phenomenal. If you make $100 live on $90, invest the $10. 

The compounding approach can also be used in the acquisition of knowledge. If you have 24 hours in the day, use one hour for education. You can call this type of compounding as “mental” compounding. This will transform you into a reliable, faithful, with a high level of integrity and excellence, and, God willing, it will be very hard to fail in doing almost anything. 

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