ON THE NEWS the other day, they were discussing technological change. “It happens gradually and then suddenly,” said the guest commentator.
The commentator was borrowing a memorable phrase from a book written almost a century earlier, Ernest Hemingway’s 1926 novel The Sun Also Rises.
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
Although this fictional conversation refers to financial ruin, “gradually and then suddenly” is also how most financially successful people accumulate wealth. They reach their financial goals gradually by practicing good money habits over many years. Most people don’t get rich quick by earning a high six-figure income or owning a lucrative business. Instead, they spend decades saving and investing small amounts.
Meanwhile, the dollars invested compound. The investments are generating earnings that are reinvested and those earnings then generate their own earnings. Because of the way compounding works, money can grow exponentially over time. This is how our investment portfolios grow gradually and then suddenly.
Of course, it isn’t as easy as it sounds. It takes discipline to stay the course during good times and bad, so that we don’t disrupt this wealth-building process. That’s why financial security isn’t just about the financial markets. It’s also about our behavior.