![]() When you add to your wealth snowball regularly, its growth accelerates. Compounding is the reason it's so important to begin investing when you're young! But if you wait until you’re forty to make that one-time investment, your $5000 would only grow to $34,242.38 before you retire. If you never touch the money, your $5000 will grow to $159,602.25 by the time you’re sixty-five years old. In the short term, your contributions have a greater impact than investment performance, but over the long term the extraordinary power of compounding comes into play.Īssume you make a one-time $5000 contribution to your retirement account at age twenty and manage to earn an 8% return every year. Your investment returns play an important role too. It's not just earning and spending that affect your wealth. ![]() ![]() The bigger your profit margin, the faster the snowball grows. When you decide to downsize your home or work a second job or skip the new iPhone, you add to your wealth snowball.When you choose to bike instead of drive, you add to your wealth snowball.When you stay late to work overtime, you add do your wealth snowball.Each penny of profit adds to your fortune. You begin rolling your wealth snowball the moment you achieve a positive cash flow - as soon as you're earning more than you spend. And if all goes well, you'll eventually reach that Crossover Point where you can live off your investments for the rest of your life. But I can promise that if you follow the advice I share at Get Rich Slowly, you will produce a modest wealth snowball of your own. In fact, our chances of doing so are exceedingly slim. I can't promise that you and I will become billionaires. During his 85 years, he's created the greatest wealth snowball the world has ever seen. Today, Warren Buffett is worth $84.1 billion. By age 60, Buffett had become a billionaire.By age 50, Buffett had accumulated over $150,000,000.By age 30 - five years ahead of schedule - Buffett was a millionaire.By age 21, Buffett had a net worth of $19,738.The other contributing factor? Buffett was making money at an ever-increasing rate. “For Warren, holding on to every penny this way, since he had sold that first pack of chewing gum, was one of the two things that had made him comparatively rich at age twenty-five,” writes Schroeder in The Snowball. Like a money boss, Buffett kept his costs down while boosting his income. (After he did purchase a vehicle, he'd only wash it when it rained.) He made a deal with a nearby newsstand to purchase outdated magazines at a discount. He earned more money, both from work and investing. (Even back in 1952, he was obsessed with GEICO stock.) He bought his first business, a service station.īuffett got married and had kids. He wrote articles about the stock market. He continued to invest, both for himself and now for family and friends. He moved to New York to attend Columbia University, where he took finance classes from Benjamin Graham and David Dodd. When Buffett left Omaha for college at age 20, he'd saved $9804, some of which was in stocks. He had 24 years and $999,880 to go to meet his goal. He used his cash to buy his first three shares of stock. By the time he turned eleven, he'd accumulated $120. When he was ten years old, Buffett vowed to become a millionaire by age thirty-five. He could picture the numbers compounding as vividly as the way a snowball grew when he rolled it across the lawn.“ Again from Schroeder's book: “The way that numbers exploded as they grew at a constant rate over time was how a small sum could turn into a fortune. He deposited his pennies and nickels in the bank and kept track of his savings in a passbook.Īt a young age, Buffett began to grasp the extraordinary power of compounding. He hawked peanuts and popcorn at University of Omaha football games.Īll the while, he kept score. He sold bottles of Coca-Cola to his neighbors in Omaha, and he even peddled his wares to sunbathers while vacationing at Lake Okoboji in Iowa. “They became the first few snowflakes in a snowball of money to come.”įrom chewing gum, Buffett graduated to soda pop. “He could hold those pennies, weighty and solid, in his palm,” writes Alice Schroeder in her excellent Buffett biography. (He refused to sell individual sticks you had to buy an entire pack of Doublemint or nothing.) He'd buy packs of chewing gum for three cents each, then go door to door selling them for a nickel. Here he is in 1948 - when he had less than $10,000 to his name:īuffett began making money when he was six years old. He started from scratch, just like you and me. To start, let's talk about one of my money heroes, billionaire Warren Buffett.īuffett wasn't always a billionaire. Today I want to introduce you to the Crossover Point, that magical place where you have enough saved that you can live off your investment returns.
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