Compost is one of nature’s best mulches and soil amendments, and you can use it instead of commercial fertilizers. Best of all, compost is cheap. You can make it without spending a cent. Using compost improves soil structure, texture, and aeration and increases the soil’s water-holding capacity. Compost loosens clay soils and helps sandy soils retain water. Adding compost improves soil fertility and stimulates healthy root development in plants. The organic matter provided in compost provides food for microorganisms, which keeps the soil in a healthy, balanced condition. Nitrogen, potassium, and phosphorus will be produced naturally by the feeding of microorganisms, so few if any soil amendments will need to be added. (LINK)
View this video by kitchengardeners to learn how to compost in your backyard.