As a young man still more than a year away from the big 3-0, I have most of my adult productive years ahead of me. What are my goals during these years? Here, I intend to break them down by age. For the record, I will turn 30 in one year and eight months.
At age 30…
I want to have a net worth of $50,000. My current net worth is approximately $16,000, after being negative less than six months ago. This means that I need to increase my net worth by $33,000 in 20 months.
I want to have an emergency fund that would sustain my family for nine months. In other words, I want an emergency fund that will enable a withdrawal of $3,000 every month for nine months. This means I need to have an emergency fund of $26,500. This dictates that my primary investment mechanism over the next year or so is into a high-yield savings account. Given my current (approximate) balance of $5,000, I will have to put away about $1,050 a month into savings over the next twenty months to reach my goal. This will be very difficult, but it is possible, and it meshes well with my net worth goal.
At age 35…
I want to have a net worth of $150,000. This means a $100,000 increase in net worth over the five years from my thirtieth birthday. With reasonable investment and debt reduction, this is a reasonable goal.
I want to own my own home. My targeted price point is a $160,000 home, which requires a $32,000 down payment. To save up this amount (at an average return of 5%), I need to invest $325 a month starting today, or $475 a month starting on my 30th birthday. Of course, I may be able to exceed this return level, but we will use it as a starting measure.
I want to have an emergency fund that will sustain my family for eighteen months. On my thirty-fifth birthday, I want to have an emergency fund that will allow me to withdraw $3,500 a month for eighteen months without any worries. Assuming that I made my goal of a nine month emergency fund on my 30th birthday, I’ll need to add another $34,000 to the account in the following five years, which means simply $400 a month, a much more reasonable monthly amount than before. This is the emergency fund I wish to have in place for the remainder of my life, so I will sit on this now and leave it alone to earn a stable income in CDs and high-yield savings. Since I am saving $200 less a month starting on my 30th birthday, what will I do with that money?
I want to have a $15,000 investment portfolio. With that extra $200 a month, I want to build a small investment portfolio. Since I know little about investing, I’ll have to research this a bit, but at this early life stage I feel fine having some risk in it. I just know that I want to be building a nest egg.
At age 40…
I want to be debt-free except for my mortgage. I currently have substantial student loans outstanding that have a fairly low interest rate, but I am on pace to eliminate all of them on my 38th birthday. I intend to follow through completely with this.
I want to have a net worth of $300,000. Once my emergency fund is in place, I plan on focusing much more on my investment portfolio. I hope to build it to $125,000 by my 40th birthday, with the rest of my net worth coming from other assets (403(b) and IRA).
At age 50…
I want to be debt free. I will own my own home free and clear at this point and be considering the possibility of moving into a home to retire in, the home my wife and I have always dreamed of. But I will not go into debt for it; I intend to simply liquidate other assets and pay for it in cash.
I want to have a net worth of $1 million. That pretty much says it all.
At age 55…
I want to never work a day again for the rest of my life. I estimate this will take a net worth of $1.5 million on top of my bank-guaranteed pension which will begin at age 57 (my job guarantees a pension based on years of service – they pay a separate financial institution to provide this pension).
Do you have a life plan comparable to this? Once I set this all down on paper, it became a relief to me merely because it existed. It provides goals for me every step of the way – now, can I meet those goals? That is the challenge, but now I feel for the first time in my life that I have greater financial goals, ones that I can achieve if I work diligently at them.