Some Thoughts on Growing Net Worth in the Early Years

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3 min read

Starting out, a high income is the one ingredient that will get you moving the fastest.

There are two components that determine how much you’re able to save: your income and your expenses. The larger the gap between these two, the more you can save, and the faster your net worth will grow. 

Keeping expenses low is important, but you still won’t get anywhere fast with a low income. Consider an individual who is able to live frugally on $25k per year. With a yearly income of $30k, they can only save and invest $5k per year. Assuming a 5% annual return on investments, they’ll only have $29k after five years:

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Increasing yearly income to $40k, $50k, or $60k in those early years makes a huge difference:

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Investment returns won’t move the needle much in the early years. 

In each of the above savings scenarios, investment returns would account for only 14% of the total ending net worth after five years:

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A whopping 86% of your net worth (assuming 5% ann. investment returns) will be composed purely of savings. This is why your savings rate is so important in the early years. It’s the number one factor that determines how fast you can grow your net worth.

Lucky individual stock picks won’t impact your net worth much if you don’t have enough capital to work with. 

In college, I used to dabble in individual stock picking. What I didn’t realize at the time was that I simply didn’t have enough money to invest to reap the benefits of lucky stock picks. At the time, I would typically invest $500 in a single stock and ride out the investment for a few months, hoping to sell for a quick gain. 

Suppose I invested $500 in Facebook 5 years ago. Since July 2013, the price per share has risen from $25 to over $200 for a 8x gain:

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Even if I had made a lucky pick with Facebook, an 8x gain on $500 would only be $4,000. More than likely I would have sold once the share price doubled, which would have turned my initial $500 investment into less than $1,000 after trading fees and capital gains taxes.

Even if you get lucky and invest in the right individual stocks in your early years, you probably won’t have enough capital at work to actually see meaningful gains.

Side hustles can help increase your income when you’re at the bottom of the salary totem pole at work.

My sister works as a vet technician and makes about $16 per hour. She loves working with animals so she decided to sign up for Rover, a site where people in your area will pay you to watch their dogs.

Over the past year she has landed six or seven repeat-customers who pay her on a weekly basis to stop by and let their dogs out, take them on walks, or feed them. She typically earns around $200 per week doing this. 

Her day job pays her ($16 * 40 hours) $640 per week, so she has effectively boosted her income by over 30% from a side hustle she loves doing.

Thanks to the internet, it has never been easier to connect with people looking for specific side hustle services. This can have a real impact on your earnings, especially if you’re just getting started in the workforce. 

I personally tutor people in stats for $40/hour, which is a niche topic that I have domain knowledge in. It’s a lucrative side hustle that boosts my own income.

Once you join the six-figure net worth club, stock price appreciation and dividends start to make a real difference. 

With $100,000 invested, a 10% up year for the stock market would increase your net worth by $10,000. That’s a noticeable amount.

Stock dividends also become noticeable.

During my first six months of 2017, I earned a total of $38 in dividends.

During my first six months of 2018, I earned a total of $861 in dividends.

That’s an entire month of rent that I could pay for using only dividends. 

Patience is key in the early years.

Building your net worth is like getting a flywheel to start spinning. It’s annoyingly slow at first. It requires serious work on your part to get the flywheel moving. But once it starts, it only moves faster and faster as time goes on.

This is why it’s so important to cultivate patience when you’re just starting out. You likely don’t have a high income or investment returns to help you out. So, you have to quietly sit and work. Steadily save. Consistently invest. Live simply. Increase your income.

Your tiny daily habits will lead to visible net worth growth a few years down the road. Until then, practice patience.


I keep my financial life as simple as possible by only using two tools. I track my net worth for free using Personal Capital and I track my monthly spending using the Monthly Spending Summary app.

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

7 Replies to “Some Thoughts on Growing Net Worth in the Early Years”

  1. Hiya,
    When you mention savings are important in the early years,
    do you mean savings as in invested $$ in the stock market only?
    How about taking emergency fund, war chest, silver coins and those biscuit tin bills in consideration? Where do they fit in?
    Thank you.

    P/s: Working my way towards the $100,000 mark. Currently have about $20k emergency fund, $20k in the stock market (bag of ETFs, REITs, Blue Chips) and $20k in war chest waiting for some cheap(er) buys. Its taken me about 7 years.

    1. Hey Chesser,

      When I say savings are important I mean that the your net worth when you’re just starting out will be mostly dependent on how much of your income you’re able to save. It’s fine to have an emergency fund and alternative investments but I personally prefer equities that have growth potential over the course of the coming decades. Congrats on your own progress, that’s great work!

  2. It’s amazing how critical patience is. o.O

    I noticed, when reading your post about your year’s nightly journal entries, how often you mentioned patience, pondering its significance and power. Everybody wants the quick/easy win, but smaller steps, applied consistently and with patience, can make a world of difference in the long run.

    And honestly, side hustles are the best. Besides providing additional income, they keep you active, busy, and engaged. My side hustles add so much value to my daily life, beyond the financial. 🙂

    1. Patience is huge. It’s something I realize more and more as time goes on. So few people have extreme patience, which makes them vulnerable to quit due to short-term setbacks. People with patience have a massive advantage.

  3. Hello Zach, Big believer here of increasing active earned income in the early years by laying a solid foundation of education, skills and experience. I think we are saying the same thing. So I just want to emphasize your points. They are wise. There are few short cuts. And only a few are able to find those short cuts. Tom

  4. Hi Zach-
    I have a bunch of miscellaneous questions.
    Does dividend income get reinvested or is it designated for savings?

    I was looking at previous posts and didn’t see any mention of medical/dentist/vision expenses. Maybe I missed something…..

    One reader had mentioned that he felt that a lot of your allocation was based on stocks. What’s the plan, say, if there is a job loss or the market goes downhill ?

    We’re older now and do not rely solely on funds/stock market. We do have tangible things as well as 401k’s, some stocks, and real estate.

    As a side note, with kids in college, I decided to take out whole life insurance polices for them. Their age makes the policies cheaper and they can cash them out if they need money later on.

    Another side note regarding HSA’s as a savings tool is goodif you have a high deductible medical plan. We do not and therefore, are not eligible for a HSA. But it’s another place to keep cash, grow it and use it.

    1. Hey Lisa,

      Dividend income gets automatically reinvested.

      I am currently on my parent’s insurance so I don’t have medical/dentist/vision insurance expenses although I do pay for all of the appointment/miscallaneous admin/co-pay charges myself.

      Most of my allocation is tilted towards stocks which I’m comfortable with because even in the event of a market downturn I plan on not touching my investments. Of course it’s easier said than done and I haven’t lived through a bear market, but I plan on remaining invested and picking up more shares if prices dip. I hope to not touch my stock investments for decades to come.

      Glad to hear you have your own portfolio in order and best of luck on your own financial journey 🙂

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