Teenage Mary’s Exponential Journey to Wealth

Unbeknownst to most, there really is a secret to becoming wealthy. It’s actually a formula, and not a complicated one at that. It’s a function of time and mathematics. And you don’t need to start with a lot of money. Anyone can do this, even teenagers. Here’s what the formula looks like:

Small Starting Amount of Investment Capital
+ Regular Periodic Additions
/ Allocate to Different Growth Strategies for Diversification
x Steady, Exponential Growth
= Lots of money!

The average person doesn’t follow this formula. They go to school and strive to get good grades so they can attend a good college. But college means college loans, and the better the college, the deeper the debt. Upon graduation they try to get a good job so that, after taxes, they can still afford a mortgage payment which, on top of their student loans, puts them very deeply into debt.

Then of course, they incur even more debt in the form of a monthly car payment, not to mention an open, running tab of thousands of dollars on credit cards. They work for 40-50 years while trying to set aside some savings each year and relying upon financial advisors to help them grow a large enough nest egg to retire on.

They dream of retiring early, but most never do. The picture is a familiar one. Virtually everyone you know travels this path.

When you ask someone what they do for a living, you expect them to say that they drive a truck, teach school, design software, perform brain surgery, whatever. But you hardly expect them to answer, “I’ve been a professional investor since I was 16 years old. I retired at 30, but I spend my time these days volunteering at an animal shelter.”

Mary is a mature teenager who baby sits for income. She earns $200 a month and saves $100 each month towards her future. After 10 months Mary has saved up $1,000. She can apply these savings towards a college education which, given current economic conditions, offers no guarantee of early retirement, or she can invest her $1,000 and allow it to compound over time.

Mary makes friends with a home schooling family and learns about College Level Entry Placement exams, or CLEP’s, that provide credit for college courses without having to attend college. Mary learns that she will be able to study at home on her own schedule and take all of her CLEP’s for a combined total cost of less than $3,000, then go shopping for a college diploma.

Mary borrows $3,000 from her parents and pays them back over 60 months at $50 per month. With no need for government loans for tuition, textbooks (everything she needs is online) and contributions towards professorial pension plans, and with her college degree strategy solved, Mary turns to her wealth building strategy.

Mary reads a few good books on the science of wealth building like Rich Dad, Poor Dad, by Robert Kiyosaki and Trade Your Way to Financial Freedom by Van Tharp, then she conducts Internet research to find market forecasting services with strong, established track records.

She settles on a subscription to a monthly advisory service that trades option collars on the Russell 2000. Mary doesn’t need to understand how option collars actually work, she just needs to know the firm’s track record, as well as the potential rewards and risks involved.

Mary opens an online discount brokerage account that will place these trades for her, automatically, each month, at no additional cost above the usual brokerage commissions, and funds her account with the $1,000 she has saved. Even with the occasional losing month factored in, Mary averages 3% per month after netting out subscription and commission costs.

Mary has studied the astonishing power of exponential growth to compound money over time and figures that an average 3% monthly return should double her account in about two years. She knows that it will take a decade or more to compound her money into the nest egg she desires, but she’s patient because she trusts in the mathematics behind the process. She also knows that regular additions to her account will dramatically increase exponential growth, so she adds an extra $100 to her account each month and her account doubles to $2,000 in just 7 months.

Mary withdraws $1,000 and funds a second online brokerage account which she uses to trade a second advisory service which also averages a 3% monthly return. She does this because she understands the advantages of diversification. Because her babysitting service has grown and now makes several baby sitters available, Mary can afford to add an extra $100 a month to each of her two accounts. Her total investments double to $4,000 just 6 months later.

Mary now withdraws $500 from each account and uses the $1,000 to fund a third account which she grows by using a third advisory service that also averages 3% a month. Her investments double to $8,000 and again to $16,000. It has now been 35 months since she started and, even though she’s only 19 years old, she’s well on her way to financial freedom.

Because her babysitting service has now blossomed into a personal concierge service for people who are too busy working two jobs to shop for their own groceries, walk their own pets or pick up their own dry cleaning, Mary can now add an extra $100 to each of her three brokerage accounts each month.

Along the way Mary has diversified into additional investment programs and services, including a relationship with Prism Solutions with a portion of her portfolio. Mary’s investments are really taking off now and 13 months later her total equity has doubled again to $32,000. Four more doublings later and Mary’s portfolio has grown to $512,000. Nine years have now passed since the start of her journey and Mary is set for life at 25 years old.

Mary started with $1,000 and made total additions of $30,100 to her accounts over a 9-year period, for an average monthly addition of $264, about $9 per day. This was easy for Mary to do. All that was necessary was to make some minor adjustments to her budget, none of which she even felt.

Mary now has over a half-million dollars. Meanwhile, most of her friends are saddled with huge college loans and still working at entry level jobs. One friend who manages a local Wendy’s restaurant is making wedding plans and will borrow $10,000 for a spectacular bridal gown, a large hotel dinner reception for 150 guests, a photographer, videographer, dee-jay and honey moon cruise.

Because most of Mary’s friends have to shell out in the vicinity of $3,000 a month in installment debt payments, including a mortgage, one or more car loans, student loans and credit cards, they too are being strongly affected by the exponential function, but in reverse!

To appreciate the extraordinarily negative aspects of this, consider that a single month’s $3,000 in debt payments invested at an average return of 3% per month, would double in 2 years. Over 10 years it would double 5 times to $96,000. Let that sink in for a moment.

A single month’s wasted $3,000 could become $96,000 in 10 years. And the potential to earn an additional $96,000 towards retirement security is wasted each month when another $3,000 is shoveled out the window and into the pockets of bankers and credit card companies.

This isn’t just exponential growth in reverse, it’s a giant, negative, ‘gravitational’ force pulling your financial world inwards. Many families live just a few paychecks away from being broke and circle a financial black hole their entire lives. All it would take is for a job loss, illness or other setback to interrupt their cash flow for a few months and their entire world would collapse.

Meanwhile, Mary’s portfolio is now growing by over $20,000 a month. She decides to sell her concierge service and starts tapping her investments for $10,000 a month in cash flow which provides her with a very nice life style, while still allowing the remainder of each month’s growth to continue compounding.

Even with $10,000 being withdrawn each month, Mary’s investments continue to double every 40 months and by age 30 her portfolio has grown to over $2 million dollars. After buying a country home on 20 acres, a new car, a beach vacation home, a sailboat and an RV, all for cash, Mary still has over a million dollars in her investment portfolio. Since she has no mortgage and no other debts, she can easily live on $10,000 a month and her portfolio continues to grow, reaching $10 million dollars at the age of 35.

Mary’s friends live in modest, fully mortgaged tract homes in heavily developed communities, while carrying heavy debt loads consisting of student loans, mortgages, automobile loans and credit card balances. Her friends will struggle for years to get ahead while Mary has long since retired.

With no need for a job, what will Mary do with the rest of her life? Anything she wants! These days she’s volunteering part-time at a local animal shelter while devoting her remaining time to her favorite activities which include gardening, playing the guitar and learning to speak Chinese.

Mary loves to read and has plenty of time to read what she likes. But her favorite book of all is still the one she read when she was 13 years old. It’s her 7th grade math book, the one that taught her about the exponential function.


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