Dave Portnoy reveals the No.1 thing he’s learned about money — says it took 10 years to get $1M, but now he can make $5M in 1 week. How to get ‘over the hump’ and have riches ‘come to you’

The ultra-rich rely on the snowball effect to build wealth

Portnoy is referring to compound growth, a key strategy used by many to grow wealth. The late Charlie Munger often described it as “getting a snowball rolling down a hill.”

The snowball effect helps to explain why wealth creation accelerates once a person has hit certain financial milestones. An investor who starts off with no money and invests $1,000 a month in an asset that generates 10% annual returns would make $100,000 in 6.5 years. But with compound growth, that $100,000 would take just four years to grow to $200,000, and just three more years to reach $300,000.

This is because an investor with $100,000 is earning returns not only on their monthly contributions but also their accumulated wealth.

Put another way, an investor with $100 million in net worth can easily generate $5 million quickly — perhaps within a week — because they would need to earn just 5% on their assets to do so.

In fact, Portnoy admitted during the interview that he once “spent five hours just talking about the interest" he was earning on his cash after he got rich. "I couldn't believe it, I was making money not doing anything."

This is why your early financial milestones are so critical in your long-term wealth creation journey: the earlier you start investing large amounts of money, the longer it has to grow with the most growth opportunity.

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How to set clear targets to build wealth

If you want to reach that tipping point where wealth builds itself, you need a strategy, and that starts with setting smart, achievable goals. Think of your first major milestone, such as $100,000 in assets, as the start of your personal snowball.

However, it’s essential that you consider your age, lifestyle and location while setting financial targets. A 60-year-old in San Francisco may need far more, while a 20-something in Detroit could be ahead of the curve with far less.

Once you’ve got a target, the next step is making sure your money is actually working. Keeping a large sum in a savings account earning a low interest won’t get you anywhere. And stuffing it under your mattress would be even worse. Inflation will eat away at your purchasing power every year.

Instead, build a portfolio that’s designed to grow. That might mean investing in stocks, ETFs, real estate or even alternative assets. The key is finding the right mix of risk and reward for your goals.

If you’re not sure where to start, talk to a financial advisor or planner who can help you set targets, diversify your assets and stay on track. Because once you hit that first big number and let compound growth kick in, you might find your money growing a lot faster than you expected.