Financial Freedom

The Simple Formula to Achieve Great Wealth

  • Are income and wealth due to good luck or good habits? Many politicians will say luck, but the facts prove otherwise.
  • Today, Alexander Green reveals the simple formula that allows anyone to achieve financial independence.

Social justice warriors claim that wealth disparity in this country – which they call economic inequality – is due not to education, skill, hard work, persistence and calculated risk-taking… but to “luck.”

They have to make this argument if they want to persuade more people to accept their remedy: radically higher taxes and greater income redistribution.

Taking money from those who earned it and giving it to able-bodied individuals who haven’t earned it isn’t everyone’s idea of what’s fair, especially since state and federal taxes may take one-third to a half of a worker’s annual income.

To counter those who want to keep the fruits of their own labor, the mainstream media label them greedy, selfish, uncaring… and, of course, “lucky.”

How much does luck or good fortune really have to do with it? You be the judge.

According to the U.S. Census Bureau, three-quarters of households in the top income quintile have two workers. Less than 5% of those in the bottom quintile do.

For every hour worked by a bottom quintile household, a rich household works five.

Is it luck that one household works five times more than another – or is there a better, alternative explanation?

Most of us work, of course, but many don’t save.

The Federal Reserve recently noted that nearly 80% of Americans live paycheck to paycheck. Half say they would have trouble finding $400 to pay for an emergency.

Those who are physically or mentally disabled and unable to work deserve our sympathy not our condemnation.

I support social welfare programs for the truly needy.

But that cannot possibly describe most of us. U.S. median household income was $61,858 last year.

Let’s imagine that you and I are two hypothetical families earning exactly this median income – and watch how quickly our behavior changes our economic circumstances.

I’m a spendthrift. I blow every penny I make each year.

You, on the other hand, are more prudent. You regularly save 4% of your monthly income – $190 a month – through a Roth IRA.

Let’s further stipulate that you invest it in a plain-vanilla S&P 500 index fund that generates nothing more or less than its average long-term return of 10%.

After the first decade, with dividends reinvested, you have $36,830. I have zero. As you can see, things are already unequal.

In 20 years, you have $131,865. (Finding $400 for an emergency is not a problem.) I have nothing.

In 30 years, you have $378,361. (I still have nada.) And in 40 years, you have more than a million dollars.

Plus, it’s tax-free. (Let’s remember you were smart enough to invest in a Roth IRA, where distributions are tax-exempt.)

Bernie Sanders – who loudly proclaims that he does “not have millionaire and billionaire friends” (despite having a multimillion-dollar net worth himself) – will stand at the podium and condemn you for your greed.

(As if living within your means, deferring gratification, saving and investing are selfish behavior.)

But he will ask me – who saved nothing and therefore has nothing – for my vote, so that he can right the injustice of our differing circumstances.

Some readers may not have 30 or 40 years to save and invest, of course. In that case, you need to save more or earn a higher rate of return… or both.

If you saved 10% of your income a month rather than 4% and invested in the higher-returning Russell 2000 index of small cap stocks, for example, you would have $114,638 in 10 years and $486,388 in 20 years.

You would be a millionaire in less than 26 years.

Amp up the savings or the returns even more, and you’ll be there quicker still.

In short, it’s your behavior rather than luck, fortune or “the breaks” that ultimately determines your financial well-being.

What can you do – specifically – to accelerate your wealth accumulation?

  1. Upgrade your education or marketable skills to maximize your income.
  2. Live beneath your means. (When your outgo exceeds your income, your upkeep becomes your downfall.)
  3. Save as much as you reasonably can, while still living a balanced life.
  4. Invest those savings in the world’s highest-returning asset: a diversified portfolio of high-quality stocks.
  5. Minimize your investment costs.
  6. Tax-manage your portfolio – as with a Roth IRA – to avoid the prying hands of the IRS.
  7. Let your money compound as long as possible.
  8. Try to stay married. (Not always possible, in some cases, but divorce is far more likely than a bear market to halve your portfolio.)

Is this really achievable?

Indeed it is. As a former money manager, I watched hundreds of clients do just that.

They weren’t lucky. They had a plan. They stuck to it. And they reaped the rewards.

With time and discipline, you can too.

Good investing,



An expert on momentum investing, value investing and investing based on insider activity, Alex worked as an investment advisor, research analyst and portfolio manager on Wall Street for 16 years. He now runs the wildly successful Oxford Communiqué, ranked as one of the top investment newsletters by Hulbert Digest for more than a decade. He is also the author of four national best-sellers: The Gone Fishin’ Portfolio, The Secret of Shelter Island, Beyond Wealth and An Embarrassment of Riches. He shares his wisdom in his free daily e-letter, Liberty Through Wealth.

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