Allrightythen, I hope that everyone has had a chance to read this month’s book, The Compound Effect
by Darren Hardy, as part of the SmallIvy Book Club. It’s like a bunch of folks sitting around the coffee table in the living room, except I don’t need to clean up and no one needs to bring snacks.
The description for the book was:
“No gimmicks. No Hyperbole. No Magic Bullet. The Compound Effect is based on the principle that decisions shape your destiny. Little, everyday decisions will either take you to the life you desire or to disaster by default. Darren Hardy, publisher of Success Magazine, presents The Compound Effect, a distillation of the fundamental principles that have guided the most phenomenal achievements in business, relationships, and beyond. This easy-to-use, step-by-step operating system allows you to multiply your success, chart your progress, and achieve any desire. If you’re serious about living an extraordinary life, use the power of The Compound Effect to create the success you want.”
Today I thought I’d give my impressions, and then see what other people out there think.
I was actually a bit surprised by the material covered in the book, in that I thought it would be mainly about investing and the effect of compound interest and the like. Really it was more about the compounding effects of habits. The idea is that if you do something once or twice, it really won’t make much of a difference. It is the things that we do over and over again – habits – that shape our lives. If you have bad habits, they may not effect you today or next week, but in a couple of years they’ll cause bad things to happen. For example, buying a doughnut after eating breakfast on the way to work one time won’t make you fat, but you’ll be twenty pounds heavier in a couple of years if you do it everyday. Likewise, doing on good thing today won’t make a difference, but do it as a habit for a year or two, and you’ll be amazed at how far you progress.
I thought there were a lot of good insights in the book. One that he mentioned – writing things down when you want to control things, I put into practice for my health. A couple of months ago when I assigned the book to the book club, I was severely obese and adding a cholesterol medicine prescription to my high blood pressure medicine. In the past I rarely even took an aspirin, and now I have two regular prescriptions. I decided I needed to do something.
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I started writing down what I was eating. In particular, I started to keep track of how much sugar I was putting in coffee and tea, which was a lot. Falling in line with the Compound Effect, I decided to change my habit of drinking 6-8 cups of sugar and powdered creamer -laden coffee and switching entirely to tea, putting in just one teaspoon per cup. I am still getting 9-15 teaspoons per day since I drink tea all day, which is about 150-225 calories, but I was probably getting 800 calories per day from sugar and creamer in coffee and tea. Add that to cutting back a bit at meals, splitting a meal in two for a dinner and a lunch when I go out instead of having a 1500 calorie meal, and I’ve lost about 20 pounds over the last two months. My blood pressure is also down about 20 points (they say one pound adds one point to blood pressure), now on the border between high and elevated. I’ll need to see where my cholesterol is at the end of the summer when I see the doctor again.
I’m not all the way there yet, but I think I’ll drop another 30 pounds or so if I keep eating the amount I’m now eating (I’m assuming that you’ll weight about ten times your daily calorie intake, as some medical sites suggest), so hopefully I’ll be about 50 pounds off my high by the time Christmas rolls around and high blood pressure and cholesterol will be a thing of the past. I believe I would still be considered obese given my height and weight, but am on the border.
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One thing I don’t like about the book is his constant mention of SUCCESS Magazine, a magazine he publishes. I thought that was a bit commercial. I also like his enthusiasm, but I don’t think I’ll give up listening to music or talk radio in the car on the way to and from work in order to squeeze in a self-improvement book on CD. It sounds like a great idea, but I don’t know if I’m ready to give up everything I enjoy to always be pushing to improve. I am planning to find a mentor or two for my career, which has started to stall. I will also find someone to call about once a week to discuss highs and lows as a way to have someone push me to improve.
In general I would recommend the book to a friend.
As far as investing goes, certainly good habits, like putting money away regularly, diversifying properly, and leaving things alone instead of trying to time the markets, are the keys to success. Nothing happens over night, but if you keep up these habits, you’ll find yourself financially independent with a million dollars or so in your investment portfolio in 20-30 years. Staying away from bad habits like buying new cars, buying things on payments, and raiding your investment and retirement accounts to buy stuff you don’t really need is also important. Your million dollars will disappear if you keep spending more than you make and change your habits of saving and investing. It won’t happen over night, but overspend and draw your account down just a bit each month, and it will disappear.
So what were your thoughts? Please leave your review in a comment.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
