Before I started this blog, I did not really have a good financial goal. Actually, my financial goal was similar to 99.9% of other Americans…I wanted to be rich. But what is rich? In Are you wealthy? Here’s a test, I defined wealthy as: “…when income from my assets can cover all my family living expenses and a few luxuries“. That was a good start, but now I want to put together a specific and achievable goal and plan.
Goal: Build a $1 million investment portfolio by 2017 (excluding home equity)
10 years may not sound very sexy, but I don’t know any get rich quick scheme that works. So, I have to work within my capability and 10% should be achievable. I am currently at 23% of my goal. In fact, I consider myself lucky to have accumulated this much wealth without any financial goal or plan for the past 10 years.
Actually, it was at $250,000 a few days ago before the stock market went south. Anyway, I started working in 1996 with about $20,000 in debt (mostly student loans and some credit card debt). I was able to save a large portion of my income each year, thanks to my Asian culture where it is typical for the oldest son to live with his parents. This really helped me get an early start on my financial situation.
I also started to invest in the stock market soon after my first paycheck. This turned out to be another good thing for my finances. Sure, I made a few errors along the way, but it was a small price to pay for what learned. In 1998, with considerable help from my parents, I bought a house. Although I went from paying almost no living expenses to paying for everything but food, it was another good financial move in my favor.
Overall, I did well for someone with no financial goal. If I had been more serious about personal finance, I think I could have done much better.
My plan is simple, but will be challenging to execute. To get to $1 million, I will attempt to grow my investment by 10% a year and add about $20,000 more to the portfolio each year. Here is a rough map (updated 1/1/2008):
Reaching this goal may not make me wealthy by my own definition, but I now have a road map that I can measure my progress on a regular basis. Setting a SMART goal is the key to success:
What is your goal?