I still think I can achieve my $90 million goal...
You may have thought that I would be giving up on my goal from the paragraph above but the fact is that I am more confident of achieving my goal this year than I was last year.
What gives me so much confidence?
When I did this post last year I calculated that if I did nothing special (i.e. if I didn't start a business or find any extra ways of creating wealth) I could get to a net worth of $16.5 million by the time I retired at age 65. Let me repeat that...with no effort, sub-par returns and no improvement in the amount I earned or saved I could get to $16 million dollars...
I confess when I first did that post (and when I passed on the excel file to any readers that wanted it) I knew that the numbers were fuzzy. I knew that they made really broad assumptions and life rarely goes to plan. After all if it were that easy wouldn't everyone be there?
Well now that I am a year down the track I can assess it so far. The excel file suggested that at June 2014 my net worth should be $457,000 however if you look at my actual net worth for June 2014 you will note that I was actually significantly higher than this at $503,000.
Not only does this start to prove up the fact that I can get to a reasonable net worth...it also gives me hope that I can better this if I can start businesses and bring in additional sources of income.
After rolling forward the excel spreadsheet the 'easy to achieve' target is ~$16.9 million
After inserting my new net worth into the model and keeping the same assumptions as last year, my net worth forecast (without any additional income) increased to $16.9 million purely due to the power of compounding. You can see the shift in my actual / forecast outcomes in the chart below:
Although $16.9 million is nothing to sneeze at, it is not my goal. My goal is $90 million and to achieve this I need to:
- Create new sources of income
- Improve the rate of return on my invested assets
The $16.9 million forecast above assumes that I have no other income than my current wage and this only increases by inflation over the long run. It also assumes that I achieve 6% p.a. on my investments over that same time horizon.
If I take these one at a time:
- If I manage to increase my wage at a rate of 4% p.a. instead of 3% my end net worth increases to $19 million (assuming all else remains the same)
- If I then manage to increase the rate of return on my assets from 6% to 8% over the long run by actively managing my portfolio a bit more my net worth increases to $31 million (again the power of compounding)
- I can then work out how much I need to create in other or business income in order to get to my $90 million goal and as at June 2014 this amount is $175,000
$175,000 is a huge number...how do I intend on getting there?
$175,000 per year in additional income is an incredibly large number and this is where I need to focus my attention. I am doing this in a few ways:
- I recently launched a new blog which I am hoping will be a viable source of income in the long run. Send me an email if you would like the address...don't worry I won't spam you with anything else (although if you want updates of this blog sent to your inbox sign up for the newsletter on the right side panel)
- I am looking at other business opportunities that will create money faster. I am doing this with my partner so it is taking a bit longer as it is much more of a negotiation
I have a plan...it's now all about execution
When I started writing this post I mentioned that it is easy to lose hope and lose sight of your goals. I encourage you to go through exactly what I have done above. Track your goals. See how far away you are from them and find out what you need to do to get to your goals. Putting numbers and targets and time frames on them make them much easier to achieve.
Do you think I am aiming too high? Do you think a $90 million net worth is achievable? I'd love to hear your views.