That means that saving anything less than 50% of your salary over anything less than 20 years is unlikely to get you there?
As I mentioned in a previous post: in the world of money, the ‘momentum’ that we build up comes from the power of compounding; just take a look at how $1,000 compounds over 30 years (@ 10% p.a.represented by the blue part of the graph, below) … more importantly, look at what happens if we start just 10 years later (represented by the red part of the graph):
… we can get to the same end point, but only by increasing our annual compound growth rate by a hefty 55% (i.e. to 15.5% p.a.).
That difference in compound growth rates could literally ‘force’ you out of nice, safe, easy Index Funds into making scary, difficult investments in individual stocks.
Or, if your Number / Date combination is much Larger / Sooner, it may even ‘force’ you into investing in real-estate, small businesses/franchises, or even into starting your own high-growth businesses!
Which is fine for some …
So, you could just ‘go for it’ anyway … as I’ve said before massive passion drives massive action, which produces massive results …. maybe.
But, what if you’re the more rational (sane?) type? How do you come up with a more reasonable target?
I see two ways – and, I have posts for you to read on both of these … just follow the links, below:
1. Reduce your Number: http://7m7y.com/2008/11/14/my-mountains-too-steep-part-1/
2. Extend your Date: http://7m7y.com/2008/11/15/my-mountains-too-steep-part-2/
Seems obvious and easy, right?
Well, the ‘cost’ is in delaying and/or reducing your expectations for how you really want to live your Life … so, you want to consider ALL of your options, VERY carefully … fortunately, the financial-self-discovery process itself is not difficult ….
Food for thought?