The seven wonders of the world are the most magnificent creations ever bestowed upon the Earth. I guess there are different versions of what people consider the seven wonders of the world. Here is an article I read about the new seven wonders. I like when the Grand Canyon is included in the list because I love Arizona so much.
But what of the 8th wonder of the world. Can it be more impressive than the other seven wonders of the world? I have no particular desire to visit the seven wonders of the world. Maybe one day, I will. I would, however, use the 8th wonder of the world; compounding.
I read an article on Seeking Alpha today, and there was a line that was very powerful to me. “The exponentiality of compounding is beyond the realm of our brains intuitive understanding. You will see it to believe it. This is why it has been called the 8th wonder.”
Are You Retiring To Something or Are Retiring From Something?
The reason why I find this statement so striking is because I find it to be true. We have built a sizable dividend portfolio in a short amount of time ($150,000 in 2 years). However, there have been months where I do not even know how so much money got into our accounts. It was as if someone (or something) was helping us along the way. It was compounding.
What is compounding? In the world of investing, it is the science of your money producing you more money. When dividend growth investing, the companies are growing, the dividends are growing, and your position size (the company’s amount) is growing.
As you reinvest dividends, you are buying more shares of the company. Each additional share pays you more dividends, you purchase more shares per dividend payout, and the company should also be raising its dividend over the years. More shares, more dividends, more money.
As you start your dividend journey will begin to see minor signs of compounding. We usually start with a set amount of money per month to invest, say $200. While investing, you will notice by the fifth month; you have more than $1,000. You may have $1,100.
Wealth is a Mindset
That is compounding taking effect. Also remember, that the share price of the company can be rasing as well. More shares, more dividends, higher cost of shares, more money. Once you start seeing this magic in action, you will begin to research more of the possibilities. You will want to expand your education.
Alas, compounding is not limiting to just investing; it is everywhere. The book “The Compound Effect” describes how everything we do has a compounding effect, either good or bad.
I have noticed that my financial education compounds every day. I can create entire articles from reading one sentence. The books I am making are compounding in the world, allowing people to read my works.
Print Your Own Money
You have to trust that compounding can affect your life. You will have to put yourself out there and learn new things. Most of all, you have to trust the practice. The practice is the day-to-day activities you perform to accomplish your mission. The book “The Practice” talks about showing up every day to produce creative works. However, it also works on everything in life. The practice is how the magic of compounding can start to build over time.
For dividend investing, the practice is the art of getting as much money into dividend-paying stocks as possible. You should have your automated allotments to your brokerage account already set up. However, that is just the start. The practice will tell you to get even more money into the markets.
The video games you once bought for $60 a pop no longer seem to hold the same value. You will now see that $60 as two shares of AT&T (T), which will pay a combined $4.16 annually for the rest of your life.
Cash Flow 104: Create Your Long Term Strategy
You will now start to look for more opportunities to increase your income streams to make your dividend portfolio grow even faster. These activities could include renting rooms, beginning a herb garden, selling cakes, renting your car, driving for Uber, etc. Anything to get more money into your accounts.
You will realize how destructive consumer debt is (read Good Debt vs. Bad Debt) to your wealth and health. Debt is the art of compounding working against you. It is just as destructive as investing is constructive. Avoid consumer debt at all costs.
If you noticed in the above example, it all started by investing $200/month. You saw your results improving and growing over time, and it intrigued you to take even further action. You began to invest more, learn more, increase income, all to invest more.
The Invisible Budget
Your accounts, and your life, compounded by taking simple yet positive steps to improve your life. That is the magic of compounding and creating a practice. You will be shocked at how fast you can pay off debt and build an extensive portfolio when motivated by compounding (read From -$77,000 to +$150,000 in 22 months).
Start your journey to compounding the results of your life by reading the books mentioned earlier. Also, read “Be Obsessed or Be Average.” To begin your dividend journey, read “Build the Mindset of an Investor” and the Stock Market Investing 101 series.
I also have a book that combines many of my stock market articles into one excellent, short book. I prefer to consume information in book form most of the time. It removes distractions and increases retention, in my opinion.
“Investing for Financial Freedom” and “Investing for Financial Freedom 2” Good Luck!
“The exponentiality of compounding is beyond the realm of our brains intuitive understanding. You will see it to believe it. This is why it has been called the 8th wonder.”
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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