The FIRE Fund, as you can see in the most recent update, is hovering around $350,000 in market value.
Sitting here at 35 years old (but for not too much longer), I noticed something special about these numbers.
My dividend growth stock portfolio is essentially worth $10,000 for every year I’ve been alive.
Now, I pay almost no attention to my net worth, preferring to keep my eye on passive income measured against my basic expenses in life (I don’t spend my net worth down at the net worth store, nor do I plan on selling stocks/assets in order to fund my lifestyle).
But aiming to have $10k for every year you’ve been alive is kind of a fun goal to have.
While one’s relative wealth will be more or less impressive based on age, when looking at this very basic metric, having $200,000 at 20 years old or $500,000 at 50 years old are both very good positions to be in. Of course, the former would be far more preferable due to the power of compounding, but $500k sitting around at 50 puts you in the top echelon of global wealth, and it buys you a lot of freedom and options in life.
Speaking of compounding, the reason I’m even writing about this today is to highlight just how powerful it is.
Having Less than $0 At 25
As I’ve shared before, I started my journey to financial independence behind the eight ball.
I found myself worth less than $0 at 27 years old – meaning I was worse than broke.
Weighing student loan debt against what little cash I had (my only asset at that time) found me with a net worth that was close to -$20,000.
Becoming aware that I was worth less than a baby in my mid-20s was the wake-up call I needed to get in gear.
Dedicating myself to entrepreneurship, frugality, and dividend growth investing allowed me to quickly make up ground and dig myself out of the hole I created for myself.
Eclipsing $65,000 At 30
Within just a couple years of starting my journey toward financial independence in earnest, I was able to build my portfolio into a solid collection of high-quality businesses.
The portfolio had a market value over $65,000 in May 2012, which is when I turned 30 years old.
So I wasn’t even close to $300,000 at 30.
But that’s why we keep striving. That’s why we keep saving, investing, and letting compounding do its thing.
Compounding sneaks up on you a little bit. It warms up and starts chugging along slowly but surely.
But when it makes its presence felt, it hits you like a freight train. And it just doesn’t stop.
Sitting On $350,000 At 35
I now find myself 35 years old and controlling a vast assemblage of some of the finest businesses in the world.
These companies are all raking in massive profits. Better yet, they’re very good at not only directly sharing that profit with their shareholders via dividends, but they routinely and regularly grow those dividend payments (as their profit grows).
It’s the five-figure and growing dividend income these businesses send my way every year that underpins my financial freedom, as it’s this passive income that I rely on to cover my basic expenses in life. Everything else is more or less gravy.
The portfolio, as noted at the outset of the article, has a market value of approximately $350,000 now.
That’s $10,000 for every year I’ve been alive.
However, I certainly didn’t have $10,000 at 1. Or $100,000 at 10. Nor did I have $200,000 at 20.
No, I had $0 at 25.
But that’s the nature of things if you put intelligent habits on your side. If you let the power of compounding take hold, giving it the fuel it needs by saving and appropriately saving your capital, it will allow you to zoom ahead in life and make your wildest dreams come true. I’m the proof in the pudding.
And $950,000+ At Age 55
A fun little exercise is to take your current portfolio and compound it out at a fairly modest rate over a long stretch of time, assuming you won’t even add another dollar.
This illustrates the power of compounding in a highly effective manner.
If my investments were to compound at just 5% annually (a very meager rate in comparison to the long-term rate of growth of the American stock market) over the next 20 years, and if I assume I never add another dollar (which is not going to happen), I’ll still end up with ~$950,000.
That would mean I’ll have at least $950,000 at 55. And it’s highly likely I’ll end up with way, way more.
So that’s not $550k at 55. That’s almost twice that. And that’s with putting in zero effort from here on out.
That’s the rolling and acceleration of the snowball that is compounding. It picks up speed and turns into an avalanche, whether you like it or not.
Look out below!
Conclusion
Maybe you have $10,000 for every year you’ve been alive. Maybe you have more. Or perhaps you have less.
The overarching point here, however, is that you put compounding on your side, whether you have $10k or $300k at age 30.
That’s because you can quickly eclipse having $10,000 for every year you’ve been alive, even if you start relatively late in life – and that’s with little money to start with, as I’ve proven.
What do you think? Do you have $10k for every year you’ve been alive? Do you think it’s a neat goal to shoot for? Are you allowing compounding to snowball your wealth and passive income for you?
Thanks for reading.
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.
P.S. If you’d like to have $10,000, or more, for every year you’ve been alive, take a look at some amazing resources that helped me accumulate $350,000 by age 35.
Hey Jason… what a fun and interesting exercise! It definitely is challenging me to review my perspective on a number of things, financially related, and I am enjoying how said perspectives have shifted and changed over the years. Now being 50 (and don’t think that it escaped my that you used 50 as some big target to shoot for after 35, mister :P), with fewer years to compound, but a higher starting net worth as you so aptly stated, I find it a bit more complicated to calculate my worth being a business owner. I have tangible and intangble worth (inventory that I can value, but I don’t have the $$ until I sell it, if / when I sell it). I guess the good thing is that being a small business owner, a corporate employee (yup, I have a corporate gig too), and in the catch up phase for retirement savings (50+), I get to quadruple dip – IRA, 401K, SEP IRA, HSA, so the next 5-10 years are very important – I’m working hard to save / invest at least $100k / year. At that point in time, you will be 45, worth ~ $700k, and pushing me around in a wheel chair! lol.
But I digress. Cash on the books, I’m doing pretty well on a $ / year of my life basis considering that I started this journey a mere 13 years ago (older than you are now), so I know it is possible for anyone, at any point of time in their life, to go from low ball to money ball with focus, diligence, and a willingness to forgo some immediate pleasures for comfort and security a little later in life, which comes quicker than one could ever imagine – how did I become 50 overnight? Please keep banging the drum of what is possible, and how to do it, for I am here to humbly say how incredibly important it is to prepare for the later years that I am firmly a part of now, for they will be here before you know it. For those who say ‘I might not live that long’, well then you have something to leave your family, friends, or even the local dog shelter. Chances and statistics say you will make it here. Thanks again good sir…
Andrew,
Thanks for sharing, man!
Yeah, time sneaks up on us. You think it’s a slow process, but it’s really not. Aging is a funny thing. I might be physically older. But my mind still feels young. I still look out into the world through the same two eyeballs. I’m still ME inside, but my body slowly becomes something… different. I work out twice as hard for half the results. It’s just how it is.
There was some app I saw a while ago that takes your face and artificially ages it. That’s probably not a bad reminder for some people. We think we’ll be young forever.
The good news is that, like age, compounding also sneaks up on you. But in a good way (if used correctly). 🙂
Best regards!
It is a quick and interesting rule of thumb for measuring one’s wealth Jason. But, like you, I try to focus more on the passive income my investments throw off as they relate to my expenses.
Tom
Tom,
Agreed on that. 🙂
It is a neat metric, though. To realize you have $10k for every year you’ve been alive is an equalizer of sorts, and it’s a nice reminder of how far you’ve come (since almost none of us have $100k at 10, etc.).
Cheers!
It’s like winning a cash-for-life lotto. You gained over 80% of your net-worth in the last 5 years, which reminds me about Warrant Buffet’s net-worth as he built over 98% of his assets after age 50s.
That’s the “The power of compounding!”
Currently, my portfolio generates around $9200 passive income per year. I keep reinvesting the income generated from my FIRE fund. Hopefully, I will hit the $10K milestone by end of the year.
Best Regards,
FJ,
Yeah. Definitely. I actually wrote an article a few years ago about that – about how saving and investing can quickly result in “lottery money”.
Best of luck with that milestone. I think it’s kind of a neat thing to look at and realize. 🙂
Best regards.
Fun exercise, especially when it makes you look pretty good 🙂 Net Worth (albeit combined with my spouse) is 38K per year. We’re now transitioning from standard index investing and adding crowd sourced real estate platforms to diversify and add improved cash flow into the mix. Whenever we’re done with our few ‘one-more year’ syndrome, we’ll likely look into your style of dividend investing as well.
Jason,
Sounds great. Improving cash flow is really the name of the game. Net worth means pretty much zilch to me, but I guess I thought this was a neat metric to ponder and discuss. Few of us are going to have $100,000 at 10, or even $20,000 at 20, but the odds stack in our favor once we’re in our 30s and beyond. Compounding has our back. 🙂
Cheers!
You made tremendous gains in just 5 years. It’s still amazing every time I read it. It was a much more gradual process for us.
I think $10k/year is a nice goal. It’s much more achievable than say saving a million dollars.
Most family would probably need a bit more to retire in the US. That’s where geoarbitage comes in. You’re doing great there too. Thanks for sharing your story.
Joe,
Thanks so much. It was a crazy run there for a few years. I could still be at it like I was and be sitting on another couple hundred grand, but I didn’t see the point.
Fortunately, money’s working hard for us. I admire the work ethic! 🙂
Yeah, I think it’s a neat goal to have. It works pretty well for both younger and older people. $600k at 60 – that would be $1.2 million for two people at 60 – is plenty enough for most places in the world, US and beyond (especially with SS). But geo arb would obviously take things to the next level.
Thanks for dropping by!
Best wishes.
I think it’s a fun measure but too linear to be a useful gauge, since hopefully people are compunding exponentially rather than linearly. 200k at 20 is way better than 500k at 50.
Ty,
I noted it’s much better to have $200k at 20 than it is to have $500k at 50 due to compounding’s exponential nature. However, it’s a pretty neat metric regardless of your age, as $500k at 50 still puts you in the top echelon of global wealth (as noted in the article). The earlier the better, but as I also pointed out, compounding can make up for lost time.
Cheers.
Jason, based on my progress, since I’m way down the road compared to you, and the fact that I was about where you are at your age I’d say you’ll have closer to $50 to $100k per year of your life by the time you hit 60 even though that will be far more than you’ll ever need. People that amass that much money at your age find that they can’t stop making money even if they aren’t in a 9 to 5 job. It is just a skill set that works for you because of the way you see your place in the world and a healthy desire to be productive.
steveark,
Thanks for adding that.
I definitely agree with you. The type of person who accumulates a pretty significant amount of wealth/passive income at a relatively young age will likely find that money just keeps on finding its way to them. It’s in your DNA at that point, which is why I’ve often noted how the “early retirement math” (that everyone worries about way too much) is more or less moot. You don’t accumulate hundreds of thousands of dollars in a short period of time, only to then find yourself unable to ever earn another buck. Doesn’t usually work like that. And that’s why I believe the number shown at the end of the article is way, way short of what it will eventually be in reality. Still, it’s nice to know I could kick back and relax and still end up with that much. It’s compounding, baby. 🙂
Best regards.
The growth chart I have takes all my holdings and factors in contributions and a rate of return to see how long it would take to get to $1M. This is what motivated me when I was just starting out because you could see theoretically what would occur if I stayed on track with my contributions. What’s crazy is that I’m still on track given the fact that I’ve barely contributed anything in the past year and a half due to a job loss. That’s why it’s important to invest what you can, when you can because it all adds up over time!
HP,
Sorry to hear about the job loss, but that just proves how valuable saving and investing is. A little foresight and planning goes a long way.
Even though I still enjoy investing and contributing fresh capital to the portfolio, it’s nice to know I could never invest another dime and still end up with far more than I’d ever need. One can guarantee themselves millionaire status if they just put away a little capital at an early age. Compounding is really special when you give it a few decades.
Best wishes.
Hi Jason,
You are right. We cannot rely on job to cover our expenses. The corporate overlord always want the rat runners to do more with less. When the rat runners fail to hit the KPIs, the overlords will displace them and replace them with cheaper options. No one is irreplacable. This reinforces the need for us to have options by having the FIRE fund. It does not matter how small the size of the fund is at the present circumstance. The most important thing is to get started by investing the money generated by the day job and let compunding do its work. In time to come, there is no need to contribute fresh fund to the FIRE fund as the FIRE fund is able to generate its own passive income to cover our expenses. I benefit from such strategy as I have the comfort of the Fund as back-up which gives me the option to quit the rat race anytime. Such feeling is terrific. In fact, I do not feel that I am currently running the rat race with such feeling. I still maintain the working attitude as if I need the job for survival. The corporate overlord continues to load more work to me which I gladly accept as they apparently thought that I will stay at this role for the rest of the working life. I take it as a learning process. I know that I will quit the job without qualm when I feel that it’s time for me to leave . Such feeling makes me in control of my destiny as I know that I have options.
Ben
Ben,
I hear you there. Agreed.
Feeling better at work because you can quit at any time (since you have a good chunk of your expenses covered via passive income) is something I also experienced before I ended my job. It definitely made a difference in terms of enjoyment toward the tail end of that career. But my job was such a bummer that I decided to end it anyway.
That feeling, by the way, doesn’t come about only with a significant amount of wealth. Even having just, say, $10k sitting around makes you feel a bit lighter on your feet. Gives you an extra spring in your step. And that feeling compounds as compounding does its thing. 🙂
Best regards!
Good article, Jason. It won’t be long until you are at $100k per year lived, it comes faster than you think. Or that would be closer to $10k a month- part of that relentless exponential nature of compound growth. It boggles my mind to fathom it continuing so long but there it is.
-Mike
Mike,
Wouldn’t that be something? $100k per year lived!
I don’t think I’ll ever get to that spot. Not unless I go back to the relentless effort I was putting into it a few years ago. My pace of life and work is so different these days. But that would be a hell of a thing to sit back and look at. 🙂
Thanks for stopping by!
Cheers.
Jason,
Interesting discussion, I like the metric a lot. Only makes you think of the possibilities and what could happen down the line with the power of compound. Thanks for sharing and keep up inspiring all of us.
Cheers
Dividend pursuit
DP,
The possibilities are pretty amazing, even if you start late (and with relatively little money). It’s fun to think about that. 🙂
Best regards.
Hi all,
My take is that it does not matter when one starts investing for FIRE. The most important thing is to get started now if one haven’t taken action. The rest is secondary.
Ben
Ben,
Agreed on that.
While I don’t think full financial independence is for everyone (nor is anything for everyone), having a large chunk of wealth and passive income working for you never hurt anyone. 🙂
Cheers!
Nice! Here are a couple of other fun facts to calculate. The first is how much my net worth is as a percentage of the income I’ve earned(after starting my career job). The second, since I’m still working, is when my annual investment income/gains began to outpace what I earn from a salary.
The great thing about compounding is that you can still make a ton of stupid mistakes and still come out ok. I have lost money on a house, not been properly invested, had kids, and blown money on some toys and a graduate degree – but I’m still doing really well financially.
JayP,
Awesome point there about making mistakes and still coming out.
That was one of the major underlying themes of this very article. I grew up in a crack house, lost two sets of parents, dropped out of college, blew an inheritance, and didn’t start saving one single dime until I was almost 28 years old. You can start late, make some mistakes, and/or not even do all that well in many areas of your life (I suck at almost everything in life), yet you can still come out pretty good financially on the other side if you let compounding do its thing. 🙂
Thanks for adding that!
Best wishes.
Hi, I really like your motivating articles, which are a continuous reminder of what can be done in stead of what can’t. I have not been following you longtime yet and have been trying to find out what the value of your portfolio was when you quit your job. As it is updated on a monthly basis it seems not possible to look back over time. I noted your point that the value of the portfolio is not important as long as the dividend come rolling in 😉 but still curious to learn at what value you decided to go for the (rest of the) adventure.
Marc,
You can actually pop over to Dividend Mantra (the blog I ran for years) at any time and go through the archives to look at any snapshots. For perspective on where I was at when I quit my job (May 2014), the portfolio was valued at ~$160,000. I believe it was generating around $5,500 per year in dividend income. I wrote quite a few articles around that time explaining that I felt that was enough cushion/runway to see what else was out there waiting for me. You never know for sure how those things are going to go, but you can feel pretty good rolling the dice when the odds are majorly stacked in your favor. 🙂
Cheers!
Hi Jason,
I agree with you. There is no perfect time to take action than now. This applied likwise the specific time in which the trigger to quit the rat race is pulled (i.e submission of the notice). My take is that one can pull the trigger the moment he or she deem the timing is right.
Ben
Jason, love the post and great work! Compounding is an amazing thing. Putting that money to work hard for them. I have been selling options (the conservative side of options) and collecting dividends. As this money grows, I can’t help but imagine how it would feel to have this money pay all my bills. Congrats on all your hard work. I’m sure when you were working collecting the small dividends you never could imagine how quick you would be free!
Thanks for inspiring me to start my own journey. I’m just a little over 1 year into and definitely enjoying it.
Rich,
It’s definitely a lot of fun to see that snowball pick up speed! 🙂
I originally had figured I’d get there by 40. That was the initial plan. But I became more aggressive with things as time went on. Seeing the goal become closer and clearer only made me want it more/faster.
Best regards.