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🔄 Compound Decisions – Small Choices Over Time

Compound decisions are small repeated choices that accumulate exponentially over time. Like compound interest, habits compound - good habits build wealth, bad habits destroy it. $5 daily coffee seems trivial but compounds to $173k opportunity cost over 30 years. Small consistent actions create dramatically different life outcomes. The key: today's small choice repeated becomes tomorrow's major result.

Summary: Compound decisions: small repeated choices accumulate exponentially. $50/week saved at 7% = $273k in 30 years. Daily coffee $5 = $173k opportunity cost. Alex saves $200/week reaches $327k in 15 years, Jordan spends extra has $0 - same income, $334k wealth gap from habits. Small changes compound to life-changing results.

What Are Compound Decisions?

Small repeated choices made daily/weekly that accumulate over time. Like compound interest on money, habits compound exponentially.

Examples

  • Save $50/week invested at 7% for 30 years = $273,264
  • Daily $5 coffee for 30 years = $173,025 opportunity cost
  • Cook at home vs eat out: $200/month saved = $86k+ over 30 years

📈 Positive Compounding

Good habits build wealth exponentially through consistent action plus investment returns.

  • Weekly savings: $100/week at 7% = $546k in 30 years
  • Cooking at home saves $85/week = $464k invested
  • Skip subscriptions: $50/month = $61k over 30 years

📉 Negative Compounding

Bad habits destroy wealth through missed opportunities and compound interest working against you.

  • Credit card minimum payments: $5k debt becomes $15k total paid
  • Daily coffee: $173k opportunity cost
  • Eating out frequently: $370k opportunity cost

💳 Daily Habits and Interest

Daily Spending Adds Up

Small purchases invisible individually but total thousands annually:

  • Coffee + Lunch + Snacks + Subscriptions = $7,800/year
  • Invested at 7% for 30 years = $738,000

Interest Working For or Against You

Same $200/month different direction:

  • Path A: Save at 7% = +$63k in 15 years
  • Path B: Credit card at 20% = -$90k debt
  • $153k difference from one habit

👥 NZ Scenario: Alex vs Jordan

Same Income, Different Habits

Both age 30 in 2010, earning $70,000:

Alex (Positive Habits)

  • Saves $200/week automatically
  • Brings lunch, coffee at home
  • Cooks dinner most nights
  • Drives paid-off car

Jordan (Neutral Habits)

  • Saves nothing
  • Buys lunch daily, coffee shop
  • Eats out frequently
  • Leases new car

After 15 Years (2025)

  • Alex: $327,000 invested
  • Jordan: $0 saved, $7k debt
  • Wealth gap: $334,000

Same career, same income - completely different outcomes from daily habits compounded.

Checklist

  • ☐ Calculate annual cost of daily habits
  • ☐ Project 30-year compound impact at 7%
  • ☐ Replace one negative habit monthly
  • ☐ Set up automatic savings
  • ☐ Track spending for one month

🎯 Test Your Knowledge

Quiz on Compound Decisions

1. Compound decisions are:
One-time big choices
Small repeated choices that accumulate exponentially over time
Only about money
Not important
2. $5 daily coffee for 30 years at 7% equals approximately:
$55,000
$173,000
$50,000
$500,000
3. Alex saved $200/week for 15 years and had:
$156,000
$327,000
$200,000
$100,000
4. Same $200/month: saving at 7% vs credit card at 20% creates what gap after 15 years:
$50,000
$153,000 (+$63k vs -$90k)
$100,000
No difference
5. Daily habits totaling $7,800/year for 30 years becomes:
$234,000
$738,000
$400,000
$1,000,000
6. The key to compound decisions is:
Perfection
Consistency over time
One big change
Occasional effort
7. Alex and Jordan had $334k wealth gap because:
Different salaries
Different daily habits compounded
Alex inherited money
Luck
8. Negative compounding happens when:
You save money
Bad habits destroy wealth (debt, missed savings)
Markets drop
Never happens
9. Best approach to compound decisions:
Cut everything
Choose which habits worth cost, replace one negative monthly
Keep all habits
Think occasionally
10. $100/week saved at 7% for 30 years equals:
$156,000
$300,000
$546,529
$1,000,000

📚 Back to Learning Centre

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