Golf Tournaments & Compound Interest

Everyone knows the term compound interest. Everyone knows (generally) how it works. Most of us tend to only relate it to dollar signs though. The truth is it relates to so much more, but more on that to come in a couple paragraphs.

So we know the "how", but the crux of the issue is most people fail to realize the when. For better or worse, compound interest is extremely backloaded. Your savings rate appears to be carrying the load, then boom compound interest seems to come along like a beautiful freight train. Look at any graph that shows you compound interest...put your hand over the right side and prepare to feel underwhelmed.

Looks pretty boring, right? You’ve perhaps heard the corny quote that compound interest in the 8th wonder of the world. Looking at the left side of the graph, that must be one dull world. Until you look at the right side...when compound interest begins to earn its’ name as the 8th wonder of the world.

Because it takes awhile to work, it came make us all rather impatient. Heck, I haven’t even truly experienced it.

But I have experienced it in a real life scenario on a smaller scale. A few weeks ago, we hosted the 5th Annual Jim & Jerry Smith Memorial Golf Tournament. It was a big success by basically any measure. It was not always this way though.

Our first year, we had 12 golfers and played at a pretty dumpy golf course. Our big accomplishment was making matching polos for the event. Zero fundraising. Just a fun day to remember two great men who had lost their lives too soon to cancer. The key moment during the first year was having the long term vision of what a special day and tournament this could become if we kept at it for years to come. **Enter compound interest.

The second year we played at a slightly better course, had a few more golfers, and raised a little over $1,000 for Lungevity, which is the largest national lung cancer-focused nonprofit.

Fast forward to year number five...we played at a beautiful golf course, raised $12,000 for Cancer Research Institute, and had over 100 golfers participate.

If you were to ask the original 12 golfers what their vision was for the tournament in 5 years, I guarantee it would be nothing close to what it has turned into. Similar to your investing journey, don’t be consumed with becoming a millionaire. Just do the best you can today, and watch what happens if you keep at it for years to come. You will be rewarded. Here are a few of my takeaways through the years of planning the golf tournament.

Slow and steady wins the race - My former baseball coach used to always say “you can’t hit a 5 run home run” if I swung out of my shoes. Similarly, it would have been silly to think between year 1 and 2 of the tournament it would turn into a big event. Good things take time to develop.

After investing for a short period of time, you can’t expect to be a millionaire. But over the long haul, you can make it happen.

Gratitude goes a long way - Getting people to participate and/or donate for the golf tournament can be tricky when you do it every year. Time is precious and so are people’s hard-earned dollars. But a good old fashioned thank you card goes a very long way, let me tell you.

And with personal finances, they can be stressful. But sometimes we need to allow ourselves to take a step back. If you compare yourself to others financially, you’ll always find a way to be dissatisfied. But the very fact that you’re reading this on a computer or smart phone makes you much more fortunate than the majority of the world.

Don’t expect everything to go perfectly - I spend a lot of time planning things A-Z for the golf tournament. Does that mean things all go according to plan the day of? Heck no. And that’s okay. Sometimes those turn into the funniest stories anyways.

You can plan your personal finances through the prettiest spreadsheet this world has ever seen, but guess what? Life happens and things will change. Curveballs come everyone’s way.

James Clear talks about the big difference small changes in our habits can make in his book Atomic Habits. He makes the point that massive success does not require massive action. The difference a tiny improvement can make over time is astounding.

Here’s how the math works out: if you can get 1 percent better each day for one year, you’ll end up thirty-seven times better by the time you’re done. Conversely, if you get 1 percent worse each day for one year, you’ll decline nearly down to zero. What starts as a small win or a minor setback accumulates into something much more.

Hitting consistent singles gets you in the hall of fame just as easily as home runs do. Thanks for reading, everyone. Every now and then I open up to hundreds of people via this blog and it makes me a bit nervous. Really appreciate everyone who reads each week!