Compounding Theory: Why The Rich Get Richer And The Fit Get Fitter

As a former finance professional, I observe a lot of parallels between the world of wealth and the world of health.

When you invest your money in any sort of financial instrument (e.g., savings account, bond), you receive interest on the initial sum of money that you invested. However, on top of that, there is also something called compound interest.

Simply put, compound interest is essentially “interest on interest”. The most important takeaway about compound interest is that it makes your investment grow at a faster rate than it otherwise would.

JP Morgan has a great visual example of this. An individual, Susan, who invests $5K per year from age 25-35 will end up with 11% more money at retirement than an individual, Bill, who invests $5K per year from age 35-65. Despite the fact that Bill contributed 3x as much money into his retirement account ($150k v. $50K), he will still end up with less money at retirement age. This is all due to the power of compounding.

I won’t walk you through the math, but suffice it to say, it’s true. And, it’s part of the reason why rich people seem to be getting richer. The more money you have (invested), the more money you make (in interest)*.

More importantly, I am going to make the case that compounding is also why the fit people around you continue getting fitter.

In a previous post, we talked about how healthcare is made up of the small, everyday decisions. And, as with interest, it’s the small, everyday decisions that compound over time.

The decision to wake up an hour earlier to meditate.

The decision to walk instead of drive.

The decision to have water instead of soda.

In and of themselves, each of these decisions is minuscule. However, taken together, they create a pattern of behavior. And that pattern of behavior either inches you towards health or away from health each and every day. Just as with your financial bank account, the same is true of your health bank account: are you making daily contributions or are you making daily withdrawals? Are you going to wake up twenty years from now to find your account full or depleted?

It’s not about the one-time investment in your financial bank account. It’s not about the annual check-up in your health bank account. It’s about what you do each and everyday.

Good, daily decisions reinforce other good decisions. Poor, daily decisions encourage further poor decisions. Whether you choose well or not, each decision compounds on one another.

Given this, you have to manage your health with the same level of vigilance that you manage your money. Invest today for a better today and a better tomorrow.

*Sidenote: I’m grossly oversimplifying here. There are many types of investments and time horizons and returns. And, there are obviously other positive externalities when you have more money, such as getting access to more opportunities to invest in, but let’s put that aside for the moment. The overall point still holds.