Tuesday, 12 August 2014

Progress towards my $90 million goal

Am I still confident of hitting my $90 million goal?  That's a question I ask myself now and then.  My goal seems so large and unattainable at times.  This is especially true whenever I do my net worth update every month...the incremental improvements seem so small in light of the overall goal.

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:

But that's not $90 million.  How are you going to get to your real goal?

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:
  1. Create new sources of income
  2. 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.


  1. Hey 90M congrats on the net wealth post and thanks for sharing.. I'd love to read about the new blog and if you could send that excel file acorss that would be great :)..

    Looking forward to watching us both grow our net wealths and catching up for that beer at some stage..

    A couple of devils's advocate questions I have for you.. Have you factored kids into the equation and what sort of sacrifices do you feel you would need to make to get there i.e. working 80 - 90 hours per week to get business up and off the ground?

    On an investment related note as well, what are your thoughts on needing investment property to reach a signficant amount of wealth.. Personally I think it is necessary to do so as without the leverage it would be tough but am interested to hear your thoughts on this..

    Cheers and catch you soon.. Keep up the great work!!

    1. Hi Jef - not a problem I'll shoot through the excel file as well as a link to the new blog.

      Happy to answer the devils advocate question
      - I have assumed a 50% savings rate in my assumptions above on current earnings. A fair chunk of my wage is in my bonus so if I just manage to save that each year I'm a significant part of the way there. Include superannuation and I get even closer.

      - I have thought about the kids issue and realistically I would need to get any business off the ground before I have kids. I realise this narrows my time frame quite a lot so I need to get a move on.

      - The investment related question - I don't think any investment class is 'compulsory'. Leverage certainly helps accelerate returns but I have seen some people generate really great returns and be well on their way to financial freedom without owning a single piece of property.

      Thanks for the comments on the blog and great to see you back

  2. Thanks 90M, appreciate the email, didn't see the excel file although could have missed it.. I've got a lot of catching up to do myself but feels like am making progress..

    Good on you for such a high savings rate, have to boost my income but feel that it probably depends on putting in more hours, a catch 22 really :)

    I feel you're going very well at any rate, looking forward to watching it grow.. Out of interest what sort of passive income number have you put for FI (Financial Independence/Freedom)?

    Thanks for the answers and cheers :), it's slightly good to be back but holidays are always fun ha