Tag Archives: secret wealth goal

2014 Year End Financial Results

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So how did I do this past year, especially with respect to net worth and my “Secret Wealth Goal“?

First the good news!  Near the end of 2014, my net worth finally crossed over into the PAW (Prodigious Accumulator of Wealth) status that is mentioned in the book the “The Millionaire Next Door“.  This is the first time this has happened to me, and I have to admit I was pretty ecstatic!

Second, the even better news!  For 2014, my “Net Worth to Accumulated Salary” Ratio (again from my Secret Wealth Goal mentioned above) is now 51.43% (vs 37.40% for the end of year 2012)…. Not too shabby.  For this net worth number calculation, I exclude the equity in my house!  If I include my house, the calculation would be much higher.  Ideally, I would like to have my “net worth to accumulated salary” ratio grow to over 100%!

Having my number climb over 100% would mean that my saving and investment gains would have outpaced the total value of my accumulated salaries… and that would be extremely awesome!

Hopefully in the next 5 years I get very, very close to that 100% ratio threshold (maybe 7 years, if I put in some slack for at least 1 recession within the next 7 years…)

it was nice being a PAW, even though it only lasted for about 60 to 90 days before my portfolio pulled back a little at the end of 2014 year.  Still it was very sweet while it lasted!  I’m not far from being a PAW again, hopefully this slump in the stock market will turn positive soon and I’ll be a PAW for a longer period in 2015.  Hard to say though, this bull market has already ran for quite a long time and is sadly is getting pretty old.

Even thought I had some great financial progress for the 2014 year, in my Wealth Pyramid, I still consider myself at the lowest threshold of the “Upper Middle Class” section.  In fact, I still consider myself in the “lower upper middle class” category!

If I could increase my net worth percentile compared to the percentile of everybody in the United States by just 5%, I would then consider myself solidly in the “Upper Middle Class” area.  But I’m not there and that extra 5% move is a long jump.

Financial Pyramid

Thanks “year 2014”, while not as great as year 2013, you were still a pretty decent year overall!

Good luck in 2015,

Don

My Secret Wealth Goal

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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.

sunshine

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