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We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.
Bill Gates
Having been retired for over 10 years now and taken 9 years to get to Financial Independence, we know that playing the decades-long game is the key to success. And that goes for things other than investing and retirement, like a marriage, a passion project, raising kids, friendships, etc. Society constantly tries to trick us into chasing after quick dopamine hits—like social media, speculative investments, online gambling—but the truth is success only comes to those who wait.
When you start investing, the first year won’t change your life. The second year probably won’t either. But the tenth year? Whole different story.
Just like rolling a snowball, the initial effort is huge. But once it gets big enough, it takes on a life its own. Just like a snowball, your portfolio gains momentum and grows on its own with little effort from you.
The problem is with how our brains are wired. We tend to think about things linearly, not exponentially. After investing for just 1-2 years, we want immediate results, and don’t see how our net worth can double or triple in a decade. We don’t understand how a penny doubled every day for 30 days can turn into $5.3 Million dollars.
But if you can understand this concept, you will master your finances.
To illustrate this, here’s an example:
Let’s say you start with $0 net worth and contribute $10,000 each year. At a conservative return of 6% on average over the long term, here’s how your net worth would grow.
To demonstrate the power of compounding, I’ve highlighted how often this fictional person’s net worth increases by $100,000. So, the bolded rows are where their portfolio crosses over $100k, $200k, $300k, etc.
Year | Balance | Contributions | ROI (6%) | Total |
1 | $0.00 | $10,000.00 | $0.00 | $10,000.00 |
2 | $10,000.00 | $10,000.00 | $600.00 | $20,600.00 |
3 | $20,600.00 | $10,000.00 | $1,236.00 | $31,836.00 |
4 | $31,836.00 | $10,000.00 | $1,910.16 | $43,746.16 |
5 | $43,746.16 | $10,000.00 | $2,624.77 | $56,370.93 |
6 | $56,370.93 | $10,000.00 | $3,382.26 | $69,753.19 |
7 | $69,753.19 | $10,000.00 | $4,185.19 | $83,938.38 |
8 | $83,938.38 | $10,000.00 | $5,036.30 | $98,974.68 |
9 | $98,974.68 | $10,000.00 | $5,938.48 | $114,913.16 |
10 | $114,913.16 | $10,000.00 | $6,894.79 | $131,807.95 |
11 | $131,807.95 | $10,000.00 | $7,908.48 | $149,716.43 |
12 | $149,716.43 | $10,000.00 | $8,982.99 | $168,699.41 |
13 | $168,699.41 | $10,000.00 | $10,121.96 | $188,821.38 |
14 | $188,821.38 | $10,000.00 | $11,329.28 | $210,150.66 |
15 | $210,150.66 | $10,000.00 | $12,609.04 | $232,759.70 |
16 | $232,759.70 | $10,000.00 | $13,965.58 | $256,725.28 |
17 | $256,725.28 | $10,000.00 | $15,403.52 | $282,128.80 |
18 | $282,128.80 | $10,000.00 | $16,927.73 | $309,056.53 |
19 | $309,056.53 | $10,000.00 | $18,543.39 | $337,599.92 |
20 | $337,599.92 | $10,000.00 | $20,256.00 | $367,855.91 |
21 | $367,855.91 | $10,000.00 | $22,071.35 | $399,927.27 |
22 | $399,927.27 | $10,000.00 | $23,995.64 | $433,922.90 |
23 | $433,922.90 | $10,000.00 | $26,035.37 | $469,958.28 |
24 | $469,958.28 | $10,000.00 | $28,197.50 | $508,155.77 |
25 | $508,155.77 | $10,000.00 | $30,489.35 | $548,645.12 |
26 | $548,645.12 | $10,000.00 | $32,918.71 | $591,563.83 |
27 | $591,563.83 | $10,000.00 | $35,493.83 | $637,057.66 |
28 | $637,057.66 | $10,000.00 | $38,223.46 | $685,281.12 |
29 | $685,281.12 | $10,000.00 | $41,116.87 | $736,397.98 |
30 | $736,397.98 | $10,000.00 | $44,183.88 | $790,581.86 |
31 | $790,581.86 | $10,000.00 | $47,434.91 | $848,016.77 |
32 | $848,016.77 | $10,000.00 | $50,881.01 | $908,897.78 |
The first $100k is agonizingly slow, taking 8 years to get there. However, getting to $200k takes only 6 years. Then after that, to get to the $300k level, it only takes 4 years, then only 3 years to get to $400k, and so on. This is the snowball effect. Once your portfolio gains momentum, growth accelerates faster than you could earn the money.
Here’s another way to look at it.
This is a chart of how much money our investor is contributing into their portfolio from their own cash, versus how much is being added to the pile by their investment returns over time.
At first, all the portfolio additions are coming from cash, since it’s an empty account. Then in the next year, a little bit of money is being generated from the first $10,000. It’s not a lot, but it’s something. The year after that, the investments returns are a little bigger, but it’s still dwarfed by the cash savings.
Until, that is, around year 13. At that point, the gains from the portfolio’s investments are just as big as the cash our investor is adding to the pile. At this point, their money is working as hard as they are. And then after that, the money generated from investments actually overtakes what our investor is saving each year. Their money works harder than they do.
This is the magic of compounding interest.
This effect becomes even more obvious when we chart out how much of their total portfolio is made up of their cash contributions vs. investment gains.
At first, most of the portfolio is made up of their own cash. But over time, the investment gains catch up, then surpass the portion that came from savings. Without this compounding effect, savings would really just be a straight line, which you can see if you drew a line along the top of the blue bars in that chart. But with the compounding effect, we get this hockey-stick shape that’s the key to becoming rich.
Once you understand it, the effect of compounding is nothing short of magic. Without needing luck or a genius’s IQ, over time you suddenly find that your investments are making more money than you can contribute. Your money works harder than you.
A reader wrote in to us recently, marvelling over how much their net worth has grown exponentially over time.
I’ll refer to them as “GraphNerd” and you’ll see why that is in a second. Because not only was this reader crazy enough to binge every single post we’ve ever written on this blog, they also read the entire BORING-ass appendix of our book! And then, because they clearly have a massive boner for spreadsheets, they graphed their net worth and compared it to ours:
Theirs:
Ours:
What’s striking is that they noticed the same effect that we did. The first 5 years is slow going, but after that the portfolio reaches a critical point, and it suddenly takes off!
That’s why it took us 5 years to reach the first half a million, but only 3 years to grow another half a million.
For our reader, at the 5-year point, they were only at $200K, but another 5 years later, and that number quadrupled to $800K! In other words, it took half a decade to grow the first $200K, but only 2.5 years to grow the second $200K!
Here’s what GraphNerd thought about this phenomenon: “I knew that the past few years were going well for my portfolio, but I didn’t realize how steep the line has been now for me since 2023 (and how good this will be if it continues for another year or two!). I had about 5 years with modest growth (2016 to 2020), so it is a striking contrast to have the line graph shift to 45 degrees (like you guys had relatively quickly).”
The Time Will pass Anyway
Back in 2017, I wrote this article, talking about how we retired in our 30s, wrote this blog, and published a book by putting in consistent effort over many years. We didn’t get dejected by looking at how long it was going to take each endeavour. Since we knew “the time will pass anyway,” we might as well work on it.
Now, 8 years later, the theme of the article still stands: “The time will pass anyway.”
Readers like this one and the one I mention above, started investing right before that article was written. And now, ten years later, one is a millionaire and the other one is 80% of the way there. They knew not to give up at year 2 because of slow results, because they were in it for the long game.
What about you? Where are you in your FIRE journey? If you haven’t started, why not?
I’d love for you to come back in 10 years, reference this article, and tell me: “Look how much I’ve accomplished since this was written!”
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Love the article. My wife and I are in about our 5/6 year of working towards our FIRE goals/number and have watched our net-worth more than double to just under 2 million during that time. Our investments have also doubled to 1 million during that time, which would be even more but we decided to pay our home off in full this year to be 100% debt free. We are still only about halfway to our goal, but the momentum is definitely building :).
Even an atheist can dig it.
Matthew 13:12
“For whosoever hath, to him shall be given, and he shall have more abundance: but whosoever hath not, from him shall be taken away even that he hath”.
that’s scary pal
I agree with the “takeoff point” and have realized it exists for stock market compounding and in home payoff.
For housing, the sweet spot is just past where the principle pay down is greater than the interest payment, which on a 30 year loan with no additional payments is around year 20. This is why paying more toward the principle is important. But in the stock market, the curve goes exponential instead of flattening out. Both feel amazing!
The compounding is great to see.
I’m in the UK, the tax rates are different here and are greater than the US, so after a number of years of compounding there are many that won’t sell due to high capital gains tax that will be due.
You have no idea how much I want to start investing but there are many US funds that we can’t buy in the UK and the fees are higher then the tax’s due is also too high which is what is stopping me from doing this.
If there is a tax efficient way then i’m listening.
An ISA is very tax efficient.
Please verify what follows, since I don’t live in the UK myself.
But it seems to me that you may control how your ISA money is invested, and low-fee, no-load mutual funds and ETFs are possible choices. I would choose VTI if I could.
Hi, Thanks for your reply.
I know about Cash ISA in the recent Budget the 20k annual allowance has now been reduced to 12k from April 2027, my current bank have Cash ISA with very poor interest but tax free, other providers offer slightly better but Cash ISA don’t offer much.
Fixed term ISA can be 4% for one year.
Stocks and Shares ISA, you can buy UK stocks and shares and the fees take a lot from your returns but you can only put in 20k a year, I have looked at performance of these Stocks & Share ISA over the last few years and some of them lose and the fees on top of this.
So far I have not seen where I can buy World Index Funds or S&P500 through a Stocks and Shares ISA.
I have seen Fees are higher in the UK compared to the US it seems a rip off to UK people who want to invest.
I will investigate further.
Thanks
Antonio – you can absolutely invest just as successfully in the UK as the US – in fact some of the ISA allowances are far more generous than in the US. The recent changes were simply made to encourage more investment in S&S ISAs rather than just cash, so you invest for the long term. Be sure to also open a SIPP so you get the HMRC tax booster.
Watch “Rebel Finance School” on YouTube (the Donegans). Watch the Weeks 1-10 videos, the first hour (there are lots of extras, but these are the important ones). (Alan & Katie Donegan are friends of Kristy & Bryce who run this site.)
Watch the videos – you’ll learn which platforms to use (eg Vanguard) and which to stay away from (eg St James’ Place) and info on fees. They recommend Vanguard Global Ex UK.
They also have great tips on tracking your spending etc. They’re also just really nice good hearted fun people.
Good luck!
Hi Karlyn,
I am laughing as i’m reading your reply in a good way.
Guess what I am a member and I have completed the Donegan’s course and all the bonus lessons plus Katie’s Excel course.
What I learned here I applied to my pensions to completely overhaul what I have and now I think i’m in a better state of affairs.
I am a higher rate tax payer and I am maxing out pension contributions and claiming 40% tax relief along the way to build wealth here and I will need it in retirement.
I think pensions might be the best place for me as i’m a higher rate tax payer and this is why tax can be a problem for me.
I already have flexible private pensions which is similar to a SIPP and switched the funds and allocations I have and switched them from Active to Passive, I can consolidate them now to cut the fees further still.
Stocks & Shares ISA can be another step so I watched again the bonus video on fees Alan did.
I am already on top of budgeting & spending, this area is no issue for me but I was looking for a way to boost everything.
Thanks
Haha OK Antonio – you’ve got it under control. Relax for a bit and start planning on how you want to spend your retirement.
I have been thinking a lot about this lately after six months spent making ill-considered investments in hopes of a glitch in the system. Spoiler: it didn’t work. Now I’m back to slow and boring investments and it’s already working again.
As for decades, I feel old as shit right now…but the truth is I probably have another 40 or even more years to go. Forty! When I think about what I did with my life just between 20 and 30, or 30 and 40, etc. etc., suddenly forty years is a very long time.
Thanks for this post! Good stuff as always. You guys are amazing.
I have a recollection of passing a combined IRA/401K balance of $100K, back around 2013. Unfortunately, the buzz kill was that this was offset by a similar amount of consumer crap debt ! My stake in the ground was end of 2015 when I finally got religion on my finances (hating job kinda does that). I finally retired in March 2021.
Yes.. it’s totally doable !
Looking at my graph, I start to see a trend line similar to those. Very flat until 150K, but from that point until 250K (now), the difference is clear, it’s steeper.
I always assumed it was due to the more favorable market conditions in 2023/2024, but I’ll keep an eye on it.
Love your article on time. You really know how to put things into perspective. I also love graph and Excel. I also made an graph of your net worth timeline to do a comparison to our FI journey. 🙂
Great post. Compound interest is indeed the 8th wonder of the world. At time is the silent hero. I am amazed at how far I have come in 4.5yrs the portfolio has grown 8X. I am excited by what the future holds time is on our side.
2018 – discovered Millenium Revolution and FIRE at age 34
2019 – started on road to FIRE, net worth NZD$160,000
2025 – Net worth NZD$710,000
2028 – retirement at age 43, net worth NZD $1m
Thanks guys
Wow! Very cool! Especially the fact that you did this without a STEM salary. Would love to hear all about your story if you’re open to e-mailing (firecracker.revolution@gmail.com) me about it.
Interestingly I did notice a sudden speed up in the last two years once I hit 400k, even though I’m actually saving less, but I thought it was because of the market. We’ll see if the trend holds up.
Hey Wanderer & Firecracker,
I wrote to you a few years ago after reading “Quit Like a Millionaire” and follow your blog every week. My husband and I started our FI journey around December in 2019 and we are at about 100 million yen in Tokyo, Japan (The yen is really weak now so our stocks that are in US dollars increased $1 USD=155 yen). We earn a modest salary at a university and a mid-sized company. As I gained more knowledge in investing in Japan and taking advantage of their tax-free savings accounts (called NISA), I tried exchanging currency by opening an FX account which yields 10-12% a year in interest rates. I am so glad I came across your book 5 years ago because my husband wants to quit his job next year in July. Long story short, his company is suing him for verbal harassment and other things, so we need the money to sue his company back to defend ourselves. If we hadn’t read your book, we wouldn’t have the financial backing or FU** Y** money to do all this. Anyways, looking forward to your next post! I’m playing around with the idea of writing a “Quit Like a Millionaire (in Japan)” version blog 🙂
Amazing! If you ever write the Japanese blog, send me the link pls!
By the way, we have no debt, any property or car in Tokyo. I am a Canadian in my mid-40s of Hong Kong descent and my husband is Japanese. We are hoping to hit FI in our 50s or early to travel the world!
Hi, Are you documenting your journey in form of blog/vlog? would love to follow the journey. thanks
Had X in the market 10 years ago when I gave up my “real lawyer” job for a more relaxed one that pays way less. I have 3.5X now. I added a little along the way, but also took some out for a while to be a homeowner, and I think the additions and subtractions are a wash. It really does happen, folks.
Yup, and front loading as much as possible really boosts things. I don’t get the folks that leave money in savings accounts. If you can’t beat inflation you are losing value, not gaining.
That math works! We started being intentional/tracking in 2017. Investments went from ~ $300k end of 2017 to over $1million end of Nov this year.
That’s so cool! Out of curiosity, what’s your profession? Would love to hear all about your story if you’re open to e-mailing me and telling me about it (firecracker.revolution@gmail.com)
I pulled the pin 6 months ago, and leaving money in an equity portofolio, collecting compound interest was one of the strategies. I have been following the blog for many years, but achieved FIRE a little different. I was 63 when I retired and here is what I was able to accomplish.
2 kids thru University, no student debt as we leveraged a RESP for both kids.
Own my own 1 million dollar home in a major Canadian City, close to the city core.
Less than 130K left in Housing debt at $1860 /month, when a one bedroom apartment is now costing $1800 to rent.
I will be totally debt free within 4 years
Pension $5500 / month (gov/cpp/oas)
Savings $300,000
it would be more, but I bought a few retirement gifts: 23 foot travel trailer, RAM 1500 to pull it, and 25K on a Garage to play with my collector cars. ( at some point before you die, you gotta spend it, else what’s the point)
And heres the kicker, my wife has never had a full time job, and has not worked in over 5 years.
People ask me how I did it? They are all struggling… I know for a fact it has to do with saving as much as I could, investing in Equities long term, and being frugal with our spending. (thanks Millennial-Revolution)
Real Estate has never been an investment for me, its just a place to live, but I have a home with a large garage (built it myself) and 4 rooms I can now rent to students if I need extra income. But, since my mortgage is 15 years old, the payment stayed the same, as my wages and inflation went up, who cares how much the house is worth, my cost of living is still sitting at 2012 rates, while 2/3 of that payment is now going into equity.
Oh, and I can grow potatoes in the bank yard…
No, I am not rich, but you don’t need to be. I am comfortable in retirement, and following some simple investment rules, being frugal, not getting into debt etc, you too can achieve the same goals, including owning you own home if you wish.
Cheers
Is it cheesy to post your own url on someone elses site? My other achievement spurred by Kristy and Bryce, is to start my own online journey, to try and help others, so here it is.
https:\\www.getover60.com
This is the site for when you have achieved FIRE, what do you do then?
Please delete this if its inappropriate, I am still in the process of learning SEO, Blogging, Video and Music creation, and becoming a content provider, and side hustles, that may or may not make money.
– dale
It’s taken since 2016 to grow portfolio (excluding paid off home 7 yrs. ago), to grow net worth 4.8 times.
We’ll see how things are next yr.
Nice!
What timing. 10 years. Your 2016 CBC piece started me down this path. Coming to 10 years now and reflecting so much, especially with this season.
I regret not keeping track of my annual net worth to make a chart; 43X what I started with in 2016 (with contributions along the way), comfortably cruising now towards FI in my 30s.
Still have to find an appropriate way to thank you someday. <3. Sending good wishes for the holidays for now.
FIRECracker’s journey is truly inspiring! Her ability to accumulate a 7-figure portfolio while avoiding debt is a game-changer. If you’re looking for a helpful tool for your calculations, check out this calculator 電卓. It’s perfect for anyone on a financial journey!
Really enjoyed this perspective. It’s amazing how much can change in ten years when people stay focused on long-term goals instead of short-term distractions. I’ve found that having access to reliable information, whether for finances or public records, makes decision-making much easier. Resources can be useful when looking for accurate public information. Thanks for sharing such an inspiring reminder about the power of patience and consistency.
Stories like this really show how powerful long-term consistency and financial discipline can be. For anyone researching ownership or background details, this resource on County Property Records can be quite useful. It’s interesting how different financial choices over a decade can completely reshape lifestyle outcomes. Definitely a reminder that patience and strategy matter more than quick wins.