Tuesday, 6 December 2016

How to use the power of compounding to set and achieve your goals

How to use the power of compounding to set and achieve your goals

     Most of us are familiar with the concept of compounding, particularly as it pertains to money and the earning or paying (shudder) of interest. But the benefits of this concept can be applied to a wide variety of situations. Take for example goal setting. We all set goals. Goals help us define what we want and then help us measure our progress towards achieving them. A great deal has been said about two aspects of goal setting. Firstly, we are commonly encouraged to set lofty goals which at the outset seem unrealistic or unachievable but are meant to push us towards an end result vastly greater than where we started and one that is greater than we expected.  Secondly, we are taught to set smart goals; goals that are broken down into their smaller and more easily actionable components, all adding up to the end result. The problem with these two approaches is that we can begin to focus on one end of the spectrum to the detriment of the other. A lofty end goal can induce paralysis or feelings of being overwhelmed by the seemingly impossible or insurmountable task, while the other, that is the focusing on small manageable steps, can lead us into complacency and keep us in our comfort zone rather than pushing the boundaries of what we think is possible. So what does compounding have to do with all of this? How can we use this concept to gain all the advantages of both ends of the spectrum to keep us on track towards them? Imagine this example:

Let’s say you want to set a goal to increase traffic to your website. You decide to measure your progress by counting the total traffic to the site every week. So you check your analytics account and find that last week your site generated 300 visits for the week. Not bad you think but it could definitely be better. So what should the target be? Well 1000 hits would be great, right? Sure it’s more than 3 times what you have now but what’s the point of setting a goal if it’s not going to challenge you to push yourself? So you go with a goal of 1000 and then determine your next actions. What are the small steps you can identify and take now to start you on your way? You decide to do 3 social media posts and 1 blog post, and you estimate that this will drive traffic up by 25 hits. It’s a good start but you’re honest with yourself and you know that it’s a long way from your goal of 1000. Still, you plug away for a few more days or weeks trying the same old approach with similar results until interest in your goal fades and gets replaced by some other ‘urgent’ task. Why? Because it’s difficult to maintain focus and drive without ever seeing the reward of achieving your goal.

Now let’s try this again; this time using the power of compounding. So you want to increase traffic to your website to new and record levels. You check your stats and see that you’re at about 300 hits per week. Now you set a goal of increasing this by 10% this week. No problem, that’s only 30 more than last week. A few social media posts, a blog post, and maybe a few phone calls and you’re there. Now make the goal compounding every week so that next week the goal becomes 363 hits (330+10%). Again, you feel this is no problem. Encouraged by your results last week, you hit the ground running and manage to do 5 social media posts and 2 blog posts and you hit your goal again. Savour the reward. Now every week you approach this task with the energy and creativity to accomplish it supplied by the reward of the previous week’s achievement. Like a carrot on a stick, your goal is always just a little bit ahead of you but you enjoy the chase. Plug the numbers into a compound interest calculator and you see that a goal of a 10% increase on 300 hits compounded every week puts you roughly at 1000 hits/week by week 38 and over 3800 hits in week 52. Total traffic for the year: over 42600!

Not only does this approach surpass the original goal of 1000 hits/week but it gives you a timeline and encouragement along the way; a powerful tool that will have you both thinking big and taking small steps simultaneously and effectively towards an even greater result.

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