How Doing Simple Millionaire Math will Get You Started Towards Financial Freedom


For us, becoming millionaires became possible with a calculator, pen, and a yellow pad of paper.

Soon after Mr. H and I were married, I started going to the library and checking out personal finance books. One in particular left its mark. It was hardback, white dust jacket, and a story of how a guy mapped out what would happen if his net worth compounded at 18% via a combination of owning a home and investing in the stock market. Each year was visible, so you could see the math progress. I don’t remember if he actually achieved his goal. That part didn’t matter to me.

The compounding interest is what caught my eye. Intellectually, I understood the concept. I just had never sat down and personally crunched fifteen plus years of numbers to see the pot grow.

I don’t remember the title of the book. It was fairly nondescript and certainly no financial best seller of its era. Back then, books focused on riding the inflation fueled real estate boon ruled the roost.

For me doing the math long hand was the turning point. The simple act of using a calculator and pen to jot down each year’s number based on a fixed starting point profoundly changed my thinking.

It was logical and it was basic math.

I realized then that I didn’t know how, I didn’t know when, and I didn’t care that I didn’t know how or when. I only knew with every fiber of my being that someday, some how, we would be financially free. It’s just math.

To help get you started, I’ve provided a free Net Worth Calculator spreadsheet modeled on the yellow pad of paper I originally used 20 years ago. It’s my way of saying thank you for subscribing to my RSS feed. Simply click on the orange or blue button at the end of this post and pick a reader of your choice. Once inside my feed, click on the download link for Net Worth Calculator. It should be in the footer of each RSS entry. You can always download the file and then unsubscribe. I’m hoping you’ll chose to stay.

Play around with different starting net worth’s, growing at different interest rates. Have fun and pick huge numbers. I’ve included the option of annual savings increases as well as allowing a tax rate bite.

When you’ve settled on parameters that work best for you, use it as a guide to repeat the exercise long hand. It is more believable when you punch the numbers into a calculator than letting a computer do all the work.

If you’d rather stick to doing the calculations by hand, here’s a brief example of how $10,000 would grow at 15%.

Dollar Base x Yearly Percent Growth = End of Year Net Worth Pot
$10,000 x 1.15 = $11,500 at end of year 1
$11,500 x 1.15 = $13,225 at end of year 2
$13,225 x 1.15 = $15,209 at end of year 3
Rinse and repeat until you reach the net worth number you like.

The point of this exercise is to see mathematically what it takes to get from your start point to your financial freedom $. Maybe you’ll reach it, maybe you won’t. You will never make it if you don’t try.

Today is the day to prove that the math works. You have to believe in the numbers or in the future you will talk yourself out of doing the necessary saving and investing, treating it as a fool’s errand with no reward at the end.

With that in mind:

  • Do not worry if the numbers twenty years from now seem ridiculously optimistic for your current situation. In future posts I’ll tackle how you get from dreams on paper to making your net worth grow.
  • Do not get bogged down by taxes. Yes, Uncle Sam will diminish part of your yearly financial pot. But not the whole pot. Many protect their stock portfolios in tax deferred accounts. Even my stocks in regular brokerage accounts are only subjected to capital gains taxes when I sell, and I don’t sell very often. I certainly don’t turn over all my stocks on a yearly basis.
  • Do not focus on the negative. For all the bad things you can think of that will prevent you from becoming financially free, you could also get a raise or become better at investing or marry the person of your dreams and combine households. Good things can happen along the financial way.

In the next post, I’ll give some creative examples of how to use the spreadsheet, even if you currently have more debt than net worth. Later, I’ll talk about what we did after the spreadsheet.

Until then, download the spreadsheet inside my RSS feed and have fun …

Beware of Companies that Suddenly Start Giving Away Their Stuff for Free

Many years ago, I succumbed to a mailing from Games Magazine. For a limited time, I could subscribe at a reduced rate and get a second year free.

It was close to Christmas, a perfect stocking stuffer for Mr. H., and a steal of a price.Beware

The following summer, we received a letter stating the magazine had gone out of business and its residual assets were sold to a new company that would not honor any remaining issues. Mr. H’s stocking stuffer turned into a lump of coal.

Not long after, we bought a 35” TV. The store had a great promotion and pushed hard for us to add the extended warranty. We didn’t bite, especially when the salesman started touting how we’d get a second extended year gratis for a total of three “piece of mind” service free years.


Sure enough, not eight months later, the electronics store went belly up.

Fast forward to the present. It’s been all over the news how Etrade has gotten itself into a sub-prime mortgage mess. Recently the company has been offering all kinds of incentives to retain current customers and attract new ones. I’ve received at least three unsolicited mailings in the last two weeks.

Today I read at Blueprint For Financial Prosperity that Etrade has upped the ante by offering an entire day of commission free trading next week.


I hope things work out for Etrade but the company will have to improve a lot before I’ll entrust them with my money.

What’s even more concerning is how many opinion pieces I’ve read where the authors wanted to reassure Etrade customers with discussions of the in and out’s of how their accounts are insured. It’s especially galling when bloggers misidentify the charter of the SIPC as somehow being the same as the FDIC. The FDIC is a government entity. The SIPC is not.

Per the SIPC,

SIPC is neither a government agency nor a regulatory authority. It is a nonprofit, membership corporation, funded by its member securities broker-dealers.

Do you really want to risk being trapped in an equity you can’t sell or be prevented from hitting the buy button when a stock from your watch list has finished its bottoming pattern all because your trading account might be in limbo, waiting for restitution from the SIPC?

Not me. No amount of insurance would lull me into keeping my portfolio at a brokerage house with such public credit crunch issues.…

Mildar – Think of it as Radar for the Net Worth Affluent

Most of us have seen people in our communities that seem a bit different.

Maybe it’s the couple down the hill, married longer than you’ve been alive. At least twice a month you see them walking their dog while they look at their vacant lot. In all the years you’ve watched, they’ve always worn the same brown, out of style coats. Despite their subdued lifestyle, you also see them sitting together at the library, her reading a book, while he pours over Value Line Investment Survey and Investor’s Business Daily.

Mildar alert

How about the couple across town, married at least 30 years, still living in their first house. You know they have a few rental properties, yet you frequently see them both at Estate Sales and Rummage Sales.

Mildar alert

Or maybe it’s the college educated couple with children. The wife is a friend of a friend so you know her well enough to say she’s not what you would describe as a stay at home mom stereotype. Now that her kids are nearly grown, why hasn’t she gone back to work? Why would she waste her expensive university degree?

Mildar alert

In all three cases, you weren’t quite sure what was going on – only that it didn’t add up. Thank your inner Mildar for screaming its brains out trying to get your attention.

Most millionaires want nothing to do with the Lifestyles of the Rich and Famous. They’re too busy trying to be normal, except with a lot more money in their bank accounts. Whether you realized it or not, you’ve been surrounded by more millionaires at Costco than you’ll ever find at the local Mercedes Benz dealership. With over 8,000,000 of us, we are shopping somewhere.

Remember, it’s not what you see that’s important, it’s what doesn’t add up.

The benefit to you is to begin thinking differently about your own Mildar sightings and to start mentally cataloging the wealthy and how they really live. Personal sightings will have a much greater impact on your future bottom line than any story on the web.…

No One Dies From Paying Retail At Denny’s

Last weekend, Mr. H pulled me aside out of kid earshot.

“Want to go out to breakfast?”

I knew which restaurant he meant.

“We don’t have a coupon.”

“So?!” he replied.

He stood there, arms crossed, cocking his head to the side, and staring straight at me – silently challenging me to come up with a remotely valid reason why he couldn’t take his family out to Denny’s without the benefit of a two for one coupon or weekday special.

“OK, fine…” I begrudged.

Somehow this time I knew he wouldn’t be convinced that food tastes better when it’s a twofer.…

Financial Neumes Has Moved and Renamed

After careful consideration, I’ve decided to rename Financial Neumes to Millionaire Neumes.

The upside is the new name will better reflect what this site is all about and make it easier for new readers to find me. The sooner I make the transition, the better it will be for everyone.

The downside is you will need to update your bookmarks and if you’ve subscribed to my RSS feed, you will need to re-subscribe to since the feed has changed as well.

It might take a few days for all the details to work out. Everything  looks the same, except for the name and address changes. Mr. H is my Webmaster and is hard at work to make sure everything transfers smoothly. I owe him big.

I do appreciate your patience, especially any new visitors from the Carnival of Personal Finance #132 held at The Digerati Life. I’ve got lots of great entries ready to start the new year on January 2nd, assuming the transfer goes well.

Have a Happy New Year…