Finance Hack That Einstein Called “8th Wonder of the World”

FINANCES | INVESTING

The Magic of Compound Interest

If you’re dealing with money or possibly investing, then you definitely need to understand and harness the power of compound interest!

Even Einstein said, “Compound interest is the eighth wonder of the world. He who understands it earns it; he who doesn't, pays it.”

Here’s a simple illustration of why compound interest is so powerful. If you invest $1,000 (aka principal) with a 10% annual return, you’ll gain $100 at the end of the year.

Starting the 2nd year, you’d now earn interest on both the original $1K as well as the $100 interest earned from the first year - so basically your interest is earning interest - and it would continue to grow exponentially like this as long as you remain invested!

Here’s an eye-opening example of this at work - Let's say you're 25 years old and you decide to invest $200 per month in a retirement account with an average annual return of 7%. If you continue this until you're 65, you'll have invested $96K, but your account will be worth over $525,000, all due to compound interest!

On the flip side, compound interest can also work against you, as in debt. For example, if you have $5K in credit card debt with an interest rate of 18% and only make the monthly minimum payment, it could take you 30+ years to pay it off!

That’s one of the reasons you should always strive to pay off debt as soon as possible 😬.

There are other factors when investing and I’ve overly simplified a few points.¹ Nonetheless, you can and should utilize the power of compounding in your finances - whether it is to invest for the long term and let compound interest do its thing or to pay off your debts so that banks can’t use compound interest against you!

COMMUNICATION | LANGUAGE | PERSONAL DEVELOPMENT

Speak Like a 5th-grader

When you think of someone intelligent, do you picture them using complex and high-level language and words?

Studies, such as those led by Daniel M. Oppenheimer (no relation to the A-bomb inventor by the way), have actually proven the opposite:

People who use simpler words and language are often viewed as more intelligent and likable.

Conversely, using complicated words or language can make you seem less competent and confident.

It seems the key is “clarity.” Those who can clearly communicate their thoughts - without confusing their audience by using long or hard-to-understand words, etc. - will usually be seen as smarter.

Here’s an example of this: Steve Jobs, Bill Gates, and Michael Dell all gave talks at the same conference in 2007. Jobs spoke with 5th-grade level language, while Dell and Gates used 9th- and 10th-grade language, respectively.

Despite being the ‘simplest,’ Jobs was voted by audiences as the most impactful.

On a similar note, President Donald Trump is known to use 4th-5th grade language, with a vocabulary of an 8- to 9-year-old!¹ Regardless of political views, it shows simpler language can be effective in communication!

Let’s sum up - using simpler language, such as shorter or less complex words, will not only help you be better understood, but it might also make you seem more competent, intelligent, and likable.

Speak simpler today!

TECHNOLOGY | LIFE HACKS

Help Others to Google 😉 

Here’s a fun trick I saw a friend use recently. Someone asked him a very simple question on social media and he provided a link to an animated page similar to the one below:

The next time someone asks you a very simple question they probably could have googled the answer to themselves - e.g. "What's the weather like tomorrow?" or "What's the meaning of this word?" - just follow these simple steps:

1. Go to letmegooglethat.com

2. Type in their specific question (for example: "How long does it take to boil an egg?")

3. Click on any button to generate a link you can provide to the original question-asker. It’ll look similar to the animation above.

It’s a fun and “less impolite” way to remind others they can just google things for themselves 😂! Just beware of who you use it with and make sure they won’t be offended!

Well, that’s a wrap!

Whether it comes to using compound interest to gain a financial edge or using simpler language to sound smarter and more likable, we hope that Idle Impact has given you some actionable ideas to make concrete improvements in your life!

Also, I'd love to hear your thoughts, suggestions, or any other tips you'd like to share at [email protected].

Have a great time whatever your plans may be!

- Kevin and the Idle Impact Team

Dive Deeper with recommended reads:

• Compound Interest

  • Learn more about how to grow your wealth with the power of compound interest

  • Compound interest calculator 

• Simple Language

  • Study by Daniel M. Oppenheimer about the problem of using long words needlessly

  • Why using simple language is also good for your career