The Origin Story
Around New Year’s Day at the start of 2015, Mr. Chedda and I had a heart-to-heart financial goal setting session. Based on our current account balances and what we thought we could save over the next few years, we decided on a five year financial plan: get to $500k net worth by 2020.
So, how are we doing so far?
We started 2015 with almost exactly $150,000 bucks of net worth. It was broken down approximately like this:
|His 401(k)||$55,000||about 2 years of contributions at his current job|
|His Roth IRA||$42,000||several years of ~$5k contributions, plus a rollover of an old 401(k)|
|My TSP||$22,000||the federal government version of a 401(k)|
|My Roth IRA||$12,000||about 2 years of contributions|
|My Taxable Investment Account||$8,000||mostly money earned from side gigs|
|Cash||$11,000||between 3-5 months of expenses for us|
We were planning on getting engaged soon and trying to get a hold on what our current financial position was and what we could reasonably aim for over the first years of our nascent marriage. We were both uncertain what promotions or job changes would come, but we knew we could put away at least $50,000 a year (filling up all of our 401k/TSP/IRA options). So, we spitballed it. We picked a big round number that seemed like it would be a stretch goal, but that wouldn’t be absolutely unreasonable especially if the market worked with us along the way. And that number was $500k.
If we were only able to contribute a shared $50,000 per annum to our net worth, over five years we would end up racking up $250,000. Adding that to our existing pile of 150,000 dollar bills would put us at $250,000 + $150,000 = $400,000 by 2020. Add in a fudge factor of $100,000 extra dollars gotten by extra hard work, promotions, cutting back on expenses, and/or some investment gains, and you arrive at the $500k in 5 years plan!
Today, as we near the end of 2016, we also near the $300k net worth mark. As you can see in the graph below, we’re about $12,500 ahead of where we need to be by the end of the year! By the start of 2017 we should be $20,000 ahead of our goal!*
What?! It’s crazy that the goal we thought would really be a stretch at the time has turned out to be so realistic and achievable. Since the time we formulated the $500k in 5 years plan we married each other, both got raises at our jobs, and really cut back on spending. That magic frugality at work, guys! Boom! Financial independence used to seem like such a vague, lofty goal but it turns out that while our backs were turned (and our fronts weren’t spending too much), our money has been piling up big time!
*This is a very good thing, because Mr Chedda will be starting a period of unemployment come Spring. More on that in the Mr. Chedda Quit His Job! post.