How Small Amounts of Money Grow Very Large

Small investments can grow into mountains of cash. Learn how a backwoods accountant grew an eight figure net worth. #investments #indexfunds #personalfinance #financialindependencePeriodically I get a message from a reader congratulating me on my financial success in life. The topic also comes up in consulting sessions more than I care to mention. The inquiry is always respectful and congratulatory. These people think I did something extraordinary when in fact it was actually a straight forward and simple process.

Part of my financial success is a direct result of living into my 50s. Time does a lot for net worth. Another huge advantage is I spent my entire adult life (except for those 14 months I played janitor at the church after I got married) self-employed. Business allowed me to control my income and taxes thereon more so than if I have a W-2 job at the local mill.

I’ve shared the story you are about to read many times in my office. By writing it down I hope it is easier to grasp the concept and how you can build a very large nest egg in short order. I get the feeling when I speak this concept it goes in one ear and out the other. I get it. However, this is too important—maybe the most important part of personal finance to reach financial independence—to just let it go as is. Once you grasp today’s message you have all the ammo you’ll ever need to control finances in your life and create a massive liquid net worth.

Awesome Results!

The discussion usually begins when a reader checks the Rockstar Finance Net Worth Tracker and notices their favorite accountant floating in the stratosphere. The good news is things aren’t as rosy. It’s been a while since I updated Rockstar (actually, I never updated after providing my original net worth) about my financial condition. A good market and increasing real estate values have my net worth several notches higher than listed.

I say “aren’t as rosy” because people tend to shoot whoever is in first place. (I have bullet wounds to prove it.) People also give me too much credit due to past success. Unfortunately, I’m not right because I have more. (Repeat that last sentence a few times until it sinks in. It will be useful when you want to give me credit when credit isn’t due and in your personal life when you think you’re right because you are so awesome.)

Eight figures is a worthy accomplishment, no doubt. What I did to get there isn’t as hard as you think. Let’s get to the math proving I’m a country accountant who fell into it and came out smelling roses.

Once Upon a Time There Was an Accountant. . .

Explaining how I amassed an eight figure net worth requires we use simple math. (Country accountants can’t think too hard. Hurts the head.)

First, we need to know a bit about the general equity (stock) market. The S&P 500 averages ~ 7% per year, plus inflation. Add it up and you get ~ 10% for an expected long-term return. Jeremy Siegel did the hard math proving these simple final numbers.

Annual returns are all over the map, but time smooths out the bumps and Siegel is right, the market pumps out around a 10% return over most extended period, dividends included. So nobody reaches for their calculator, we will use another simple yardstick: the Rule of 72. Simply stated, the Rule of 72 says you can divide 72 by the rate of return to determine how long it takes to double an investment. In our case things are about as simple as they get. Divide 72 by the 10% average market return to discover your S&P 500 index fund doubles every 7.2 years or so, depending on the market on the specific day.

Want to be a rich fat cat? Then follow these simple rules to build a massive liquid net worth for early retirement. #personalfinance #FIRE #earlyretirement #wealth #fatcatOkay, so we know we double our money every 7 years. Sometimes the market gets behind, other times it races fast forward. In the end we end up doubling our investment every 7 years and a bit.

Mrs. Accountant and I met in 1987, caused the stock market crash of ’87 and then got married in ’88. (Okay, we had nothing to do with the October 1987 stock market crash. It sounded impressive though, didn’t it?)

In 1988 Mrs. A and I decided investing was important for our future. Roth IRAs didn’t exist and traditional IRAs had a maximum contribution limit of $2,000 per person per year. Well, you can guess what Mrs. A and I did. Yup, we dumped $4,000 into our IRAs and got a tax deduction. Capital gains and dividend distributions were reinvested and untaxed because they lived inside a tax sheltered IRA.

Here we need to start some simple math. No need to grab your calculator; fingers and toes should suffice.

We were 24 year old whipper-snappers back then. Your favorite accountant was as sharp as a turnip green. But we did manage to engage the gray matter long enough to fully fund our IRAs and good thing we did.

Everyone, ready your fingers. We need to know how many 7 year periods passed between the ripe old age of 24 and the current age of 54. Let’s count, shall we children. Twenty-four goes to 31, to 38, to 45 to 52. STOP! That will be close enough for rural work. Also, we will double every 7 years and forget about the .2 thingy, okay?

We discovered 4 doublings of our original investment. $4,000 turned into $8,000, then $16,000, then to $32,000 and finally $64,000. For the record, there was nothing Mrs. A and I wanted when we were 24 that would make us feel $64,000 of pleasure today.

We’re not done! Remember we stopped at age 52. Add a few more 7s (52 to 59 to 66) and we discover the account will double two more times before we reach full retirement age for Social Security and nearly a third doubling by the time we reach mandatory distribution age for our IRA at 70 ½! So, $64,000 turns into $128,000 before racing to $256,000. If Mrs. A trips me before collecting income from the IRA we will be looking at north of $400,000 by the time Uncle Sam tells us we must withdraw from our IRA, or else (pay a penalty)!

The current value of that original $4,000 is now around $64,000. Not bad. It’s what we call a 16-bagger (an investment that is 16 times the original value) in the industry.

Reality Check; Isle 4

$64,000 is a far cry from an eight figure net worth. But Mrs. A and I stuffed more than $4,000 away each year. Those first years I worked out of the home (a remodeled basement). Costs were low. No driving, no office building and no additional insurance or utility expenses. We lived on ~$9,000 per year the first few years we were married. We walked all over town as love-sick birds. We had it made!

You don't need to inherit a fortune to be rich! Small amounts of money grow rather large rather fast with three simple rules anyone can follow. In fact, the lazier you are the richer you will get. #retirement #earlyretirement #investing #indexfunds #networth #nestegg #personalfinance #FIREThe first year investment in the IRA rose to the $64,000 level. Then came year two. We added more to the IRA; the maximum again. We kept doing this year after year. Mrs. A and I budgeted the IRA contributions to be made before any discretionary expenses. This was our future and we were serious about it.

More income meant more money in qualified (tax-advantaged accounts, usually retirement accounts) and non-qualified investments (non-retirement accounts with no tax deferral). I went crazy for a decade and a bit buying residential real estate. (I really mean crazy. The number of buildings we owned was obscene.) I tested investments to learn the investment and tax consequences. (Where do you think I got all my financial knowledge from? The School of Hard Knocks. I had skin in the game.)

When alternative investments ran their course the excess funds were plowed into mutual funds; actively managed early on, index funds later.

You may have noticed the top of the net worth list on Rockstar Finance contains older people, usually in their 50s or older. Slide down the list a bit and 40-somthings start making an appearance. It takes time and perseverance. The trick is simple. Invest a tidy sum and watch it double again and again and again and again and again. . .

Secrets of Secrets

Consistency is vital. Starting and adding to your portfolio on a regular basis is the secret. Keeping your paws off the stash is also mandatory! Spend less than you earn, invest in simple and easy broad-based index funds and wait. That sucker starts growing slowly right out of the gate. Then it gathers steam as it accelerates higher. Before long investment gains exceed new money invested during the year! (What an exciting moment in a young man’s (and woman’s) life!)

It doesn’t matter if the market is high or low. You need to get your money in now and swear an oath to never touch the thing until you are retired. Mrs. A and I were lucky. When we got married the stock market hadn’t fully recovered from the crash so we got in somewhere in the middle of the high and low. Still, we had plenty of years where the market was up significantly and we still added to the pile. (Man! If we had just waited until the Dow came down we could have gotten in cheaper than a DJIA of 3,000. Ah, I guess it pays to be stupid.)

To recap: You need to do only three things to have an eight figure net worth: Start early; invest consistently; and wait. Time solves all broad-based index fund problems.

And that is how you turn a small amount of money into a mountain of cash.


More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

A cost segregation study can save $100,000 for income property owners. Here is my review of how cost segregations studies work and how to get one yourself.

Worthy Financial offers a flat 5% on their investment. You can read my review here. 


Keith Taxguy, EA

Keith started his tax practice in 1982 and went full-time in 1989. An enrolled agent (licensed tax professional) since 1992, Keith has focuses on helping businesses and individuals pay the least amount of tax allowed by law.


  1. Renard on July 23, 2018 at 7:58 am

    Sitting my kids down to read this now (one college, two in high school)…..they may not love you now, but they will. Great motivational refresher for them.

    • Keith Taxguy on July 23, 2018 at 8:21 am

      Yeah, my 18 year old daughter was running around the house this morning yelling, “I’M RICH! I’M RICH!” When I’m dead and gone the next generation will have something to remember me by. (They call me Plato at the office. 😉 )

      In truth, Renard, the simplest advice is often the most powerful and useful.

  2. Jerry on July 23, 2018 at 8:02 am

    It sounds like you no longer invest in real estate. Is that the case? If so, did you find the time commitment didn’t justify the returns? And yes, I also found you via the Rockstar finance directory. Your success still stands out amongst the crowd and makes me want to find attributes to emulate. I still find it impressive. Thanks for sharing.

    • Keith Taxguy on July 23, 2018 at 8:28 am

      Jerry, it was the “crazy” part of real estate that did me in; as in I bought a “crazy” amount and burned out. I wouldn’t invest in real estate right now due to prices compared to rents. However, I will probably dip my toe in again, but will handle zero management. I’ll do the buying and selling. Property managers will do the rest while I review their performance. If the right property at the right price shows up I’d swing. My guess is we’ll need RE prices to get more reasonable. In the past my RE holdings were all local. This time around I’m looking national. I’ll buy when people are scared and hold for life this round.

      One thing you’ll notice about me is I’m patient. I love doing stuff, but when it comes to investments, I drop the money in and then get lazy. I still own my original shares in JNJ and KO I bought when I graduated high school in 1982. I never got around to selling. Oh, well.

      • Jerry on July 23, 2018 at 9:20 am

        Being patient/ lazy is definitely something I need to work on when it comes to certain investments.

        Oh I know how crazy and real estate go hand and hand. That makes sense. You look for value and make sure the return is worth your time. I’d much rather buy some JNJ and go to sleep for 30 years than buy a rental and never sleep haha. Thanks for replying.

  3. SavvyFinancialLatina on July 23, 2018 at 8:24 am

    Thanks for writing this post. It’s a good reminder that slow and steady wins the race. @28 progress seems infinitely slow…

    • Keith Taxguy on July 23, 2018 at 8:40 am

      Don’t worry, Savvy, it picks up fast.

  4. Kristen on July 23, 2018 at 8:28 am

    Thanks for this! At 34, I find myself getting very impatient occasionally, and this was a timely reminder to stay the course and keep doing the right thing.

    • Keith Taxguy on July 23, 2018 at 8:42 am

      Kristen, follow my example. Invest the money because you’re too lazy to spend it. Never play with the money after it’s invested because you’re too lazy to mess with it. I turned investing into a required bill from a demanding vendor and then acted like the money was gone. I do review my investments a time or two during the year, but I’m too lazy to do anything about it unless there is a real crisis. There’s never a real crisis.

  5. Maria on July 23, 2018 at 9:25 am

    Great article and I wish I had seen it at 20. If I’m being honest, at 20 I would have ignored the advice anyways because that was back when I knew everything 🙂
    I feel it’s too late for me (although I am getting better I think), but I do consistently tell 18 and 20 year old kids to save as much as possible and never take out any loans except on a home. I send my son your articles quite a bit, especially the ones where you talk about Jordan Peterson since he is a rock star to my son (and me too really).

    • Keith Taxguy on July 23, 2018 at 9:32 am

      It’s never too late, Maria! At 90 my grandfather (where I got many of my frugal habits from) was still practicing good money habits. The best time to start is today. As for the kiddos, they hear more than you think. My girls seemed to miss what I was saying too. Now I overhear my oldest daughter preaching my lessons to her college friends and work hard to suppress a laugh. The repeated message become habit. That is why it is so important to feed your mind good stuff every day, again and again.

      • Maria on July 23, 2018 at 10:40 am

        Good thing you post most every day! Although I don’t always comment (not sure what to say most of the time), I always read the posts. My relationship with money is a work in progress but a very worthy one.

  6. Brian McMan on July 23, 2018 at 9:54 am

    Ahh yes this is how I think about F.I. Sprint to the half way point, then wait 7 years and you’re golden.

    So in order to get that original money, do you think I should research selling tradelines as a side hustle or something else? Seeing how I’m a near minimum wage worker with no credit cards and a 600ish credit score…$1000 a month sounds too good to be true.

    • Keith Taxguy on July 23, 2018 at 10:04 am

      Brian, selling tradelines is an easy (easy) way to turn some coin. Your credit score doesn’t preclude you from selling tradelines, but you need a tradeline to sell and that requires ownership of a credit card. You need a credit card for about a year or a bit more before you can use it to sell tradelines. Just because you have CC doesn’t mean you have to use it. With CC, if you buy gas once a month and pay the balance in full your credit score should increase.

    • JD@WealthNotRetirement on July 23, 2018 at 12:58 pm

      Brian, just wanted you to know you’re sentence “Sprint to the half way point, then wait 7 years and you’re golden.” is perfection. While I’m well aware of the 7 (to 10) year doubling concept and preach it a lot, your sentence is concise (and puts it into reach for more people). If you can JUST SAVE HALF of what you THINK you need, TIME will take care of the rest. I’m going to steal it for my blog (and I’ll give you credit of course). Thanks.

  7. Jenny on July 23, 2018 at 11:47 am

    Another great post! I feel like I have a good handle on this, but the occasional reminder is nice, and great encouragement. It actually encouraged me to drop some more money into my accounts. Rather than automatically depositing money into my taxable and tax deferred accounts just once a month, I now upped it to twice a month. Every little bit helps! Thanks again. I’ll be sharing this post.

    • Keith Taxguy on July 23, 2018 at 2:18 pm

      Awesome! Remember, every dollar invested today is worth about $2 in seven years. But, in 35 years it is worth $32. Each and every dollar grows around 32 times in 35 years! That is serious money. Every $1,000 becomes $35,000. See, with bigger numbers it does become impressive. Don’t let anyone or anything shake you from your perch, Jenny. The danger zone is when the world is ending again and the market is down. That is when it is most important to stay the course. I advise laziness at these times. It’s too much bother to sell out of index fund positions or lower automatic investments. Of well! I’ll just have to live with the consequences in 5 to 10 years when the account value doubles again.

      • Jenny on July 23, 2018 at 2:36 pm

        Thank you! You’re absolutely right. After reading this post I really dug into my Roth that I opened back in 2008. Day to day it doesn’t seem like much, but going back in time and seeing the growth was impressive. Thanks for everything you do !

  8. Debt Free Dr. on July 23, 2018 at 2:01 pm

    Hey Keith: I love your humor intertwined in your posts. 🙂

    My wife and I also got lucky and started investing around 2008 when the market was very low and so far (fingers crossed), have yet to see a down year yet (but know it’s coming).

    Anyway, I plan on giving a lecture at our local college this Fall about the basics of investing and think that your three secrets:
    Start early; invest consistently; and wait are hard to beat.

    BTW: I enjoyed our consulting day last week and look forward to working together…

    • Keith Taxguy on July 23, 2018 at 2:12 pm

      The best advice is usually the most simple, Doctor. Feel free to share the information. Even better, you have my permission to print out and disseminate the materials.

  9. Steve on July 25, 2018 at 9:23 am

    I want my boys to read this. I totally agree with you. People don’t realize how little amounts really add up when you couple them with compound interest. It’s like that chart that shows one man investing early and one waiting 5 more years (but investing more). Guess who had more money during retirement? The man who started first, even though he started with less. Great write up.

  10. thehappywayfarer on July 25, 2018 at 7:51 pm

    This is the very advice I heard repeatedly from my father and his best friend, who was my financial mentor, in the sixties and seventies. I can remember them telling me about this incredible new tax shelter called an IRA which they clearly thought was a gift from Heaven.

    The Rule of 72 was one of the first tools in my investing toolbox. They drove home the philosophy which they called the magic of compounding with George Clason’s 1926 classic The Richest Man in Babylon. In college in the early eighties, Charles Mackay’s 1841 classic Extraordinary Popular Delusions and the Madness of Crowds warned me about the other side of the investing equation as did Milton Friedman’s 1965 book The Great Contraction and John Kenneth Galbraith’s 1955 book The Great Crash.

    What amazes and saddens me is that the key to accumulating wealth has been around in all these books for years but people still act like it’s a big mystery.

  11. Sam on July 26, 2018 at 9:30 pm

    Hey Keith, this was a great read on the snowball effect of directing savings towards retirement. Did you invest mainly in mutual funds or did you also invest into individual stocks?

    • Keith Taxguy on July 27, 2018 at 9:09 am

      I invested in everything know to man. Mutual funds were the bulk of my investments, but I dipped my toe in many different things over the years. I have the scars to prove it. The good news is that I tickled the alternative investments while storing the bulk of my liquid net worth in mutual funds/index funds.

  12. How Small Amounts of Money Grow Very Large ⋆ Camp FIRE Finance on July 31, 2018 at 3:10 am

    […] The Wealthy Accountant […]

  13. […] How Small Amounts of Money Grow Very Large You may have noticed the top of the net worth list on Rockstar Finance contains older people, usually in their 50s or older. Slide down the list a bit and 40-somethings start making an appearance. It takes time and perseverance. The trick is simple. Invest a tidy sum and watch it double again and again and again and again and again. […]

  14. Jersey Guy (Accounting Degree also) on September 15, 2018 at 11:00 pm

    Keith …you speak the truth ….invest early and pretend the money is gone ….20-25 yrs you’ll be amazed what you’ve accomplished with some basic sound investments in funds / dividend paying stocks. Compounding and time is your best friend in this marathon. The other points you make are key, living within your means and saviing / investing religiously gets the job done. On compounding : 1 cent …1 penny that doubles every day for 30 days …day 1. = 1cent day 2= 2cents = day 3= 4cents = day 4 =8cents ……etc. day 30. ~ $5,200,000 that’s 5.2 million ..that is an illustration I use for my kids to drive home the power of compounding

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