… don’t worry, here’s a short-cut where you can jump straight in
Now, back to today’s post ….
That’s right, it’s not the size of the mountain … but, the gradient of the curve that will get you!
Given enough track, any train can climb any mountain. The track just can’t be steep … hence lots of track … hence lots of meandering around and around to get to the top (if that’s where a train really wants to go) … hence lots of time.
The train can get you there, it just can’t do it very quick!
Similarly with your Number … the size of the number doesn’t phase me, nor should it phase you …
You want a million dollars?
Easy, buy a $100 unit in a low-cost Index Fund and wait …
Want a million in today’s buying power? Then, you’ll need to wait another 38 years.
Want $5 Million in today’s buying power? Just wait 21 years more!
You see, it’s not the size of the mountain that will kill you, but the gradient (steepness) of the sides that you need to climb.
That’s why we also need to know the Date that we want to achieve the Number:
Enter your starting Net Worth, your ending Number, and the number of years in between into a simple on-line calculator, and it should tell you the Average Compound Growth Rate required to go from the bottom (you current Net Worth) to the top (your Number).
The Average Compound Growth Rate is a measure of how ‘steep’ a financial mountain you need to climb … and, that should tell you whether you need a train, a fast car, or a helicopter to get you to the very top in time.
According to Michael Masterson in his book Seven Years To Seven Figures:
Required Compound Investments
Growth Rate Required
8% Index Funds
30% Real-Estate together with Stocks
45% Real-Estate together with Stocks and Small Businesses
50%+ Start Your Own Business
So, how big is your mountain? More importantly, how steep the gradient?
And, are you prepared to try a new mode of transport, if that’s what is required?
If not, you’ll either need to find a smaller mountain (deflate your expected lifestyle) or simply give yourself some (a lot?) more time!