Now that I’ve finally reviewed our net worth and have a better idea of our current finances, I started looking into the future. The ultimate goal is to build up a portfolio that can provide a decent amount of passive income so that I can venture off to other interests and not feel bound to a specific amount of income. But, I also don’t want to be so old by the time this happens that I don’t have the enthusiasm or energy to do some of the things I may want to do.
I’ve previously followed many other finance blogs as they published their adventure to attain certain goals, like Million Dollar Journey. Perhaps this is something I can do as well. In some ways, publishing the progress publically provides some accountability and keep me following a plan. Plus, it’ll help me keep a record of how I came to some decisions and keep tabs on the progress.
A million is a pretty standard target to shoot for, although with inflation, having a million in the bank doesn’t pull its weight as much as it did in the past. None-the-less it is still a fantastic milestone to achieve, even more so if we can achieve it by 40 years of age.
This is a million dollars in savings and investments and will not include any physical assets like our home.
So what will it take to get there?
Determination, dedication, and consistency. I truly believe if I dedicate effort to this it is completely achievable. However, it won’t be easy considering we’re starting from only about $230,000 and the goal is only 7 years away. We do have some extra cash to put into this, but as of right now, we’re still anticipating a house purchase and so I’m not certain how much money we will have left. However, I hope to avoid using any of our funds currently in the TFSA.
Return rate if we don’t contribute any more money to the investment accounts
So, for starters, let’s consider how much of a return I need from the current accounts without any added contributions to the account.
Assuming a principle of $230,000 and 7 years, I would need a return rate of 23% year over year. That’s quite the return to achieve while having a balanced portfolio of low risk and high risk investments.
Annual contributions with a return rate of 10%
Let’s consider a different alternative, what if the rate of return is assumed 10%, how much would I have to contribute to the account? Assuming the same $230,000 starting principle and 7 years, it worked out to approximately $58,000 a year. That’s a LOT to add.
Okay as I write this, it is slightly discouraging to see the results of the scenarios above. With a baby on the way and going to one salary, how the heck will I be able to add that much to the account OR reach those type of returns annually?!
But, I guess that’s what makes this a challenge.
Along the way, I’ll have to find other sources of income to help facilitate the growth of these investment accounts. I’ll also need to dig deep into my investments and actively work on trying to achieve gains greater than just 10%.
Tracking and blogging
To keep track of the progress, I’ll be tracking and blogging the progress as I go. Hopefully, along the way, I might be able to help some folks by providing some useful information on what worked or didn’t work!
Money will always be left on the table
Now that I’ve finally reviewed our net worth and have a better idea of our...