If you take a standard old copper penny, and double it every day for 30 days, it becomes a huge number. I’m sure some people just can’t relate to it. After all, who can actually do this?

Well, challenging as it may be, if you get out the calculator, the numbers add up. This also means mathematically its possible, that each and every day doubles from the last. This is compounding at its finest, uninterrupted and purely a math example.

There are some teaching points here that are both simple and powerful – if a person can understand and apply them.

#1 – Double It

In this example, the days actually only represent another doubling period, and in this case Day 1 gets 29 more doubling periods. In real life, you can use the rule of 72 to estimate to quickly estimate how many years a doubling period will last.

If you take 72 and divide it by the interest rate you expect, that will give the number of years for your nest egg to double (hypothetically, only if you get that rate from end to end, and no interruptions/set backs).

#2 – Start Early and For As Long As Possible

Can you see that the lion’s share of the growth is in the last 2 days, meaning that it took 28 compounding periods to get to that point. This is why starting as early as possible is key. You need to maximize your time to let your money compound over and over.

#3 – Focus on Consistent, Reliable Growth.

Look at Day 15, you made $163.84. Not too shabby, that’s over a 10,000X return. Lets say you took the family out for dinner to celebrate, and used some of your money. And the next day you start up over again with $20.48 on Day 16 now. How far will you get on the 30th Day? What happened?

So this is what happens when the compounding is interrupted. It can happen if money is withdrawn, you lose the interest rate you were counting on, or if the account takes significant losses. In this case, restarting the compounding periods will only get you up to $335,544.32, not the 5.3 million at Day 30.

#4 – Discipline, Engineering, and Control.

By now you might be thinking “so what, nice narrative, and what’s this got to do with me.” Well, suppose you’re able to control the environment in which your money grows daily, privately, and doesn’t attract tax. Do you see how you can build significant wealth if you can control the conditions, and prevent any disruption

How many times can you make your money double if you could eliminate negative returns, taxes, fees, penalties, and transfer costs?

Sadly, the lifetime potential growth of most people’s money is eroded due to these very factors. This looks like another future topic to expand on.

Worse yet, people try and build wealth in ecosystems they have little to no control over, just because that’s what everyone else is doing, and it looks good when the markets are hot. Maybe, you got a match at work, or tax deduction. But who has control of your money, and can you easily access it? Is there any guarantees that you’ll get 100% of your money when you want it?

It only makes sense to want to operate in a tax free environment, get compound growth, and have access to all available capital when you want – – – complete control. Would this be of importance to you if you want to go large and deposit serious capital to get more money hitting those doubling periods?

If you believe in the power of uninterrupted compounding, when would you ever want your money to stop compounding?

By Justin Dormer