I want 2016 to be amazing and I know you do too. Part of what I am trying to do differently this year to make it so is to take a great book and really focus, week by week, on one thing from the book that I think will make a big difference and actually apply it on a daily basis. I am focusing on one nugget instead of just pounding through books without taking action on what I read.

My book is The Compound Effect, by Darren Hardy. I actually read the book last year and started to apply some things but it has so many nuggets that I decided to delve deeply into it. Everything he says can be applied to any area of life so I am going to take my nuggets and share them with you with a financial focus.

Let me start by telling you what he means by “Compound Effect.” From page 9, “The Compound Effect is the principle of reaping huge rewards from a series of small, smart choices.” Ah-ha! Bag my big, grandiose plans to live like a pauper in order to saves thousands each month, pay off all of my debt, and sacrifice all comforts. That doesn’t really work for more than, oh, about a day. Instead, make a bunch of small, smart choices.

So, let me ask you, in terms of your money, how can you make a few small, smart choices this week? I do talk about this all the time – 5 bucks matters – but to really understand how powerful that is in terms of consistently applying it, do the math:

One “5 buck” choice a day x 7 days a week x 52 weeks a year = $1,820

That’s real money! That’s a trip (look at Groupon Getaways – I could go to Costa Rica for 7 days, all inclusive with airfare for $799! I could take a friend and still have $222 in spending money.) Seriously, wouldn’t your rather go to Costa Rica than buy that $5 magazine/coffee/dessert/trinket?

I could put that in my IRA and save $564 in taxes (25% Fed and 6% state) and still go to Montego Bay, Jamaica for $599 and keep my $1,820 invested, growing, and creating wealth.

I could pay down a credit card balance at 21% interest and save $382.20 in interest over the next year. (With that $380, I could rent a condo on Jekyll Island for 3 nights and have plenty for gas and food once I am there. Talk about the best of both worlds!)

Wow – putting that 5 bucks into an envelope and passing on that little thing today could really make a big impact in my life – Costa Rica! for 7 days! Who might I meet? What might I see? How refreshed would I be after that vacation? Would foregoing the coffee or the magazine or the trinket really have any impact on my day today? Not really – that’s a small thing that is easy to pass up in favor of COSTA RICA!

The amazing thing is that it can be so easy – such small sacrifices could reap such a big reward if, and this is a big, important if, if we do it consistently over time. Passing on one magazine is great, but it won’t get you to Costa Rica or to a big IRA contribution. Consistency over time is where the power is – that is where the compound effect takes off.

Here’s a secret: consistency isn’t really my strongest suit. I like to do the project, be done, and move to the next big thing. (Hence, my ability to write a book but not to publish a blog post every, single week.) Next week, I am going to talk about how I plan to turn that weakness into a strength.

To your financial success!

Tana

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