Time is a scarce resource. Probably the scarcest resource as you can’t manufacture it or grow it in a field. Yet, time is an essential component in everything we do. With every decision, we can choose not only what to do but when to do it.
What I’ve found in many areas of life is that often times, when you do or start something is just as important–if not more important–than what you actually do.
OK, I’m going to get a little technical. Not trying to overwhelm you but I believe this concept is central to understanding how to accumulate wealth and find abundance in many areas of life. So I’m going to try my best to keep it as simple as possible.
What it is
There’s a basic principle in finance that is at the core of every decision. It’s called time value of money. It’s based on the notion of compound interest which is interest that is paid on both the principal portion of an investment (the amount originally put in) AND the interest that has been accrued up to that point.
Here’s a recap:
Principal = what you put into an investment originally
Interest = money that is paid to you in increments on that principal investment
Compound interest = interest that is paid on the PRINCIPAL in addition to interest paid on the INTEREST already earned up to that point
Phew!
That might sound a little scary but basically, time value of money is the idea that if you invest one dollar today, it could be worth a little bit more tomorrow and a little bit more the next day and a little bit more the day after that and so on. It’ll keep growing, each day a little bit more than the previous day until you take that original dollar back out. Even then, the other dollars and cents generated from the original dollar will continue to compound on itself.
This creates an exponential effect on growth. The sooner you start that investing process and the longer you let it grow, the more interest you will earn.
Why it matters
This concept blew my mind. It sounded like financial wizardry.
How could money ‘grow’ out of thin air? Why does it only take a small amount of money invested to generate big gains?
Because time is a scarce resource. Add math to that and you’ve got a sleek upward sloping curve (there are complex calculations behind it but we won’t go into all that).
Why am I telling you about this?
Because you have an immense opportunity in starting now. We all do.
No matter how old or young you are, starting now is always better than starting later. You have more time from today up to retirement (or buying a house, your child going to college, or any other financial goals you may have) than you’ll ever have starting at a later date in the future.
So it’s worth it to consider not only the amount of interest you can earn once you do start investing, but the amount of interest you’re losing out on by not starting sooner.It’s worth it to consider not only the amount of interest you can earn once you do start investing, but the amount of interest you’re losing out on by not starting sooner. Click To Tweet
How you can apply this
Of course, compound interest makes sense in investing. It’s the crux of how the whole banking system and financial markets work.
But did you know this compounding effect applies to other areas of life as well? To understand this, you need to view everything you do as an investment.
You don’t get an education, you invest in an education. You don’t start a business, you invest in a business. You don’t buy a house, you invest in a house. You don’t exercise, you invest in your health.
When you start looking at things in this way, it’s easier to see the urgency of now. You realize that while you may have a lot of energy and resources, you’re constrained on time. Time is the great bottleneck in life. Time is limited.Time is the great bottleneck in life. Click To Tweet
So just like in investing money, investing in other areas of your life benefit from getting started sooner as well.
Whatever your dream is, your big idea for making a change and making an impact in the world, there’s no better time to start than now. That diet you’ve been wanting to start? That social media campaign? That book you want to write? Start it.
What you’ll find is the same compounding effect at work. It’s slow going at first. It won’t feel like you’re making any progress. It’s tedious and it’s hard to resist giving up.
But bit by bit, you start building momentum. You start feeling a sense of accomplishment that encourages you to keep going. People start noticing. They start sharing your ideas. You start reaching more followers as one person shares your post to a few people and those few people each share it to another few. People start listening to what you have to say. You start making an impact.
Before you know it, you’ve changed the world. And it all started with one decision: the decision to start.
The excuses we make
This principle applies to virtually everything we do and most of us are aware of it.
Yet, we make excuses. We let our insecurities get in the way. Our perfectionism. Our risk aversion. Our lack of faith in ourselves, in humanity, in God.
So we put it off. We lie in fear of what people might think. We spend loads of time doing research, trying to craft a bulletproof plan before we ever step out into the world. Before we ever attempt. Before we ever give ourselves a chance to fail.We spend loads of time doing research, trying to craft a bulletproof plan before we ever step out into the world. Before we ever attempt. Before we ever give ourselves a chance to fail. Click To Tweet
The problem is, every second we spend waiting is another second we’ll never get back. We’re forgoing the impact that could have been compounded from that moment in time. We’re holding out on the world and providing a disservice to ourselves and our vision.
Even more sobering is the fact that none of us are guaranteed tomorrow. Yes, perhaps some things can wait until tomorrow. But what if tomorrow’s not there?
I battled all of these excuses when starting this blog. I’ve always loved to write and when I entered the field of personal finance, I wanted to share what I’ve learned with others. I wanted to start a blog and provide valuable information to readers. I wanted to inspire and empower them.
But for a long time, my fears got the best of me. Impostor syndrome reared its ugly head. Procrastination took a toll. Paralysis by analysis became real. And I got stuck for two years.
How we can overcome excuses
So how do we override these misleading excuses? How do we find the courage to start–and the courage to fail?
First, we need to be OK with imperfection. I know it’s a tired cliche. Positive psychology has been preaching the virtues of embracing imperfection for years. But it’s key to getting past the fears of failure.
For someone who seriously struggles with perfectionism, I had to come to terms with my humanness. Everyday, I listened to a playlist of songs by my favorite artist Sia. From ‘Unstoppable’ to ‘Bird Set Free’, her songs remind me of my flawed state of being. But they also inspire me to not “care if I sing off key.” To remember that I’m not invincible nor a “Porsche with no brakes.” I’m human, and that’s OK.
Closely related to the fear of imperfection is the fear of failure. In startup business culture, there’s been a movement to “fail fast”. According to Wikipedia, failing fast means “businesses should undertake bold experiments to determine the longterm viability of a product or strategy, rather than proceeding cautiously and investing years in a doomed approach.”
Knowing that we’re imperfect, that our talent, our strategy, our resources are imperfect, we should start anyway.
In The Lean Startup, author Eric Ries writes about “beginning with leap-of-faith assumptions that cry out for testing…” and encourages the use of a ‘minimum viable product’ to test those assumptions. Instead of aiming for perfection (which often costs a lot of time and money) before releasing a product, he advocates companies start with a stripped down version with just enough features to engage early customers. Companies can then use feedback from those early customers to inform the direction of that product.
Are you working on a fully developed, earth-shattering product, or a minimum viable product? Are you creating a masterpiece or a work in progress? The answer to these questions will determine how you handle starting, and failing.
It’s time
Lizard brain, a concept popularized by marketing guru Seth Godin, is the part of our brain that responds to fight or flight, emotion, and fear–the limbic system.
To have the courage to start, we have to decommission our lizard brain. We have to prioritize the desire to make an impact over the mental resistance to failure. We have to embrace our shortcomings. And we have to just start with an imperfect idea, an imperfect product.
Whatever we do, we need to start. Time is fleeting. And the world is waiting.
