Okay, obviously this isn’t going to be much of a secret wealth goal soon, but here it is anyway…
My “Secret Wealth Goal” is to have a Net Worth amount that is larger than the total amount of my “After College” income amounts for each year that I’ve been working.
An example would be if you worked for five years after graduating, and had a salary that was 20k for the past five of those years, your “After College” total amount would be 100k. So if you invested those past five years too, and your Net Worth was 50k, you would be 50% of the way to accomplishing my secret wealth goal.
Now in my case, my “Net Worth to Accumulated Salary” Ratio is 37.4% (my house equity isn’t included in my net worth number). While the 37.4% is nice, I’m more excited that my yearly investment amount is growing fast each year! This year’s investment return plus the amount I contribute to my 401k, Roth IRA, regular brokerage account and “side income saved” should come to over 70% this year.
Obviously a more immediate wealth goal is to have my “investments plus contributions” vs my current “earned” income ratio be greater than 100%. Until I cross the 100% threshold there is no way that I can conquer the “Net Worth to Accumulated Salary” Ratio. Much like my mortgage payments milestones, I’m thinking of creating another milestone spreadsheet to track both of these goals.
Seems like an impossible goal huh, but it’s not. As my investment income keeps increasing, there should be a turning point where my investment and contributions amount will pass my salary (earned) income. While it will be an awesome day when my investment and contribution amounts surpasses my salary income, the big goal is when my investment amount surpasses my accumulated salary income.
Much like a “coming of age” test, at this crossover point I should be financially independent!
Bests,
Don
Interesting. I always went the opposite route. For years I had a goal of being able to live off of a minimum wage salary. I achieved that goal by paying off loans and houses and cars.
But family priorities come first, so I’m throwing that out the window for the time being so that we can live with my mom.
One thing I realized recently is that when I enjoy my job, I think less about net worth and retirement. I don’t think I would’ve bought another big fixer upper that needs tons of money added to it if I really hated my job.
I calculate my rate of pay from my investments too, but mostly with my kids. Once they hit the $1 per hour given a hypothetical 40 hrs per week, I’ll be pretty happy.
I play with the poverty level calc a bit also. For a family of four, 23k is the threshold. If I could hit that number with my investment gains per year, I’ll pass another milestone. Slowly, I’m starting to figure out the milestones approach to building wealth.
I hope you had a great start of the New Year! 🙂
In order to achieve a goal, it has to be stated. I started goal setting many years ago and it helps you achieve big things. Leaving retirement or anything to vagaries means you will not know what the target is. You need something to aim for in retirement or anything!
I use a lot of goals (I call them milestones), and I agree they work great. Elsewise, one is flying blindly in the fog.
Wow, that’s ambitious. You should stop working so you’ll have a chance to accomplish this goal. 🙂
Shouldn’t you look at the after tax number as well? Tax takes such a huge bite out of income that it seems impossible to surpass the sum. Good luck!
I’m late in responding to this, but nice analysis!
lol, yeah I wish I could stop working now!
I realized the tax hit, but not taking it into account makes the goal more of a long term goal. 🙂
I’m hoping that my investment and side income streams continue to grow at a faster rate than my employer income rate.
You are right, it does seem impossible, but I’m only 20k from matching my employer income now. The “other” income includes growing in my 401k, Roth IRA, Side income, and any money I find in the couch and on the streets. 🙂
It won’t be easy… this goal really relies on the magic of compound interest! I’m hoping compound interest doesn’t let me down.
I really like the principle of this goal, I’m living in London and the extortionate amount of rent and difficulty of getting a mortgage means year on year this ratio is diminishing. Hopefully my investments will begin to pay off big time in a few months and I will be able to improve upon the 23% i’m currently at!
23% is great! Just keep pounding away at it, and hopefully compound interest does it’s magic!
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Good Luck on reaching your goal! I’d like to make a goal like that too. I didn’t make much outta college (100/week as a working student on a farm) so it should be easy, except the numbers are getting bigger now that I work in IT 😉