Now that I can see compounding in its full glory in my investment portfolio, I also see the effects of compounding in the health of my family and relatives. Here’s why I think health and wealth both compound.
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As Albert Einstein famously said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
How compound interest works is you receive interest on your initial deposit, and that initial deposit and the interest are invested and make money for you and so on and so on.
Here’s a video explaining compound interest in one minute, via One Minute Economics:
According to Psychology Today, compound interest is not intuitive to us humans because humans tend to think linearly and compounding is NOT linear. When we put in effort, we expect results that are similar to the effort that we put in.
With compounding, you put in the effort UP FRONT and you see the results much later on. When time has passed you don’t need to put in that much effort to yield the same results. This is kind of the theory behind CoastFIRE. You put in the effort up front in your 20’s and then your 40’s and 50’s will thank your younger self. You won’t need to be contributing as much or (even at all according to the CoastFIRE premise).
Walletburst has a fun CoastFIRE calculator if you’re interested. You can see briefly how far you are away from CoastFIRE and if you’ve already reached it depending on your withdrawal rate and the annual rate of return on your portfolio.
In the beginning, we don’t see any results, so often we give up. But later on when you have started to create your large investment or dividend snowball, the momentum runs with itself.
To quote Charlie Munger’s comment about the first $100,000 invested:
“It’s a b—-, but you gotta do it, I don’t care what you have to do — if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.”
Unfortunately, this also seems to be the case with our health.
It is quite painful and difficult to see your relatives get older and sick or unwell. People who you grew up spending time with (but less time spent when you’re an adult). My relatives, my uncles and aunts are in their 70’s and some of them are not doing so well.
Two of my uncles recently died and they were 75 and 77, one of heart disease and the other because of stomach cancer.
Another aunt and uncle couple developed dementia are are unable to live independently in their own home anymore (they are 72 and 76). They lived quite a sedentary lifestyle for many decades, and often did not cook their own foods to eat and instead relied on take out or going out to restaurants. Of course some restaurant food can be healthy but much of it isn’t.
They were “FIRE” early on, hopefully FIRE does not increase the risk of your brain becoming less mentally sharp in the future.
Of course, a large component of your health can be related to genetics, something that you can’t modify or prevent, or even just plain bad luck.
I mean, Mr. Warren Buffett does not sound like he has the healthiest diet, but the ovarian lottery was good to him not only in the investment competence and intellectual realm but also in the health arena. He drinks multiple Coca Colas per day and eats like a 6 year old child (burgers and minimal vegetables) and yet he’s 92 years old now.
On the flip side, I have another relative who is 93 years old and very healthy and physically robust. She plays pickle ball a few times a week (and has played badminton for many decades before that), has a positive mindset, and eats healthy (she has oatmeal and avocado daily for breakfast). She flew to Dubai when she was 90 right before Covid hit and had a high tea at the Burj Khalifa.
I try to think of this before I stuff my face with chips or chocolate but I must admit, it is difficult to think non-linearly and decades down the road when you want that instant hit of sweet or salty food. Changing the lifestyle that you are accustomed to is hard to do, easier said than done, but small changes help.
Nonetheless, trying to improve your odds by improving your health now will lead your 70 or 80 (or even 90) year old self to be thanking your younger and wise self in the future.
Even more, improving your health will give you more longevity, which means more time to compound that investment portfolio (and also more time and hopefully good health to do the things you want and spend time with the people you love).
Getting Rich Quick or Getting Healthy Quick Isn’t Sustainable
Getting rich quick for example, like when someone wins the lottery or has a big windfall often isn’t sustainable. 70% of lottery winners who win $1 million or $500 million lose their money in 5 years or less.
Going on crash diets or juice cleanses or colon irrigation (I’m not sure if that’s still a thing, haha) may give you results quickly but if you don’t make the ongoing lasting habit change it’s not going to last.
It’s the habits and discipline and decision making long term that will compound and give you the results that you want decades down the road.
Getting rich slow or getting healthy slow is the way to go.
Small Habits Lead to Big Things
We are human are are imperfect and have difficulty being disciplined but small habits do lead to big things.
Small changes like making sure you:
- Get 7-8 hours of sleep
- Exercise 4-6 times per week with at least 20 minutes of vigorous activity (enough to break a sweat)
- Drink enough water (6-8 cups of water)
- Eat more vegetables
- Eat beans, legumes, and nuts
These small choices and habits can all help you improve your health for the long run.
I think I do about 2-3 of these items above consistently.
So even though it might be tempting to check out your investment portfolio for the third time this week (or day…!), it will be better for you to put your phone down or log off on your computer and instead, go for a run, or go for a bicycle ride.
This will ensure you have a long retirement with a longer duration of disability free years.
How are you trying to improve your health this year?
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GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.