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 …