I am sure all of you have heard about goal setting and how to reach your goals. I promise this post is not about that. There are all kinds of great advice about hitting your goals. That includes making them realistic, creating vision boards, starting with small things and working into larger items, etc. We all should try to have goals. I mean what is the point of life without having to live for some goal.
And it doesn’t have to be huge or mind-blowing. Maybe it is simply learning how to cook or read 25 books by the time of Christmas. It could be larger like getting that big promotion or raise or a yacht. Whatever it is goals can and should be achievable, but hopefully they are aspirational.
On this blog I have set small goals like paying off 10% of my debt per year until it is gone (and it would be gone in 7 years if/when I keep it up). I have set larger goals like I want all of my personal debt (student loans and car gone by 45). I have also set a larger goal of financial independence by 2025. I declared by financial independence day to be 8 years from now. By then I should have enough money in inflation adjusted dollars to be FI. Financial independence for me is that I have enough money form investments to cover all of our basic expenses (housing, food, clothing, etc). That should be doable because the house will be paid off by then, my student loans will be gone, and hopefully the only thing we are paying for our basic items and maybe some vacations.
I don’t plan on stopping work at that time, but at least I will be in a better financial position.
My New Financial Goal
Over the course of this blog I have really focused on paying off debt more than accumulating assets. And frankly that was a mistake. It was a mistake in the sense that I allowed the debt to be my overall focus instead of putting money into more productive ends. I should’ve been saving a lot more money for retirement prior to a couple of years ago.
Well you can’t go back so I am focusing more on asset accumulation, specifically saving for retirement. The debt will be paid off, but I doubt I will get to my goal of 45 unless some kind of windfall occurs. That windfall would occur because a) I win the lottery (even though I don’t play the lottery); b) both my parents are passed and that would be horrible. I would much rather never inherit a dime and see my parents live another 3 to 4 decades.
So to that end of asset accumulation I want to set a new goal for personal finance and that is being part of the 2 comma club by the time I am 50.
The two comma club, in case you didn’t guess it, is having a net worth of $1,000,000. In 6 years I will be (well just a bit over 6 years) 50). Hopefully, Mrs. ROB and I are parents as well (we plan on being parents by then…hopefully a lot sooner).
Why the Two Comma Club?
The truth is I just like the idea of saying it. And $1,000,000 in 6 years time is certainly not worth that much money compared to now or even a 20 years ago. But it would be unusual because most Americans will not be millionaires at the time (and eventually a million dollars as a bench mark will be played out). Ultimately, I just like the idea of it. And I figure why not. I won’t be quite FI, but I will be close.
How Do I Get There?
In order to get to the two comma club in 6 years a few things have to happen:
- I need to continue to save for retirement. Right now I put away about 25% of my wages (match included) into retirement. That needs to continue if this is going to work.
- I need to get a good return on my investments. In order for this to work as well the stock market has to cooperate and it is possible it won’t. However, I believe we are in a long-term secular bull market which means that the stock market has above average returns for a long-period of time. I believe that we are in the early to middle stages so that means we have about another decade or so left before we go back to a secular bear market. Because of this it should super charge my investments, but I could be wrong.
- My house needs to continue to go up in value. I suspect that we are in a bit of a bubble for home prices and I think it will deflate or go down to historical averages, which is about 4% a year. That is the bench mark I use for calculating my home’s worth in about 6 years. Of course I might move and I could a smaller home that is worth less or vice versa.
- I need to continue to pay down debt at about 10% per year. If I can pay down debt about 10% per year for the next 6 years then I will have basically my mortgage debt left, which will be probably around $40,000.
If all four things happen and I am pretty sure I can do 3 out of the 4 then I think this can work. Of course the big wild card is the stock market. I can’t control what it will do and I think we are actually in for a bear market within the next year or so which will cause the market to go down by 20% or more over an 18 month to 2 year period (typical length of a bear market). Even with a bear market, however, and continuing to save I did the calculations and I would still get there.
Hopefully, in 6 years or sooner I can be part of the 2 comma club. What are your financial goals?