I am reading a lot of these diaries and it's keeping me up late at night! Good reads and good info on this site.
As you might have guessed, I'm 25 living in the east coast and starting out on my investing journey. Right now I'm still living at home, been working for 2 years since university, don't really enjoy what I do but right now it's a job. I enjoy real estate and number crunching so I'm looking for something in that direction to help get me to financial freedom.
I will be starting with 10g (cash) trying to make all this possible, god I hope it can work.
My goals seem pretty high to me but hopefully with all info available I can make it happen.
- have enough cash flow to cover my bills
- build the house I want.
- have a net worth of 1M$ by 30. (This is more realistically 35 but I can dream)
- retire at 45 (more like work only when I want to)
I'm sure I'll be posting up a ton of questions on different ways to get started on my goals and I appreciate all of your input! Seems to be a lot of money smart people on here and I like it!
PS - it's late so if I started this is the wrong section I'm sorry. Cheers.
You know what, you are already worth a million bucks - if you take your human capital into account.
Just for fun, plug your numbers into the first calculator at this link. I virtually guarantee you have a holistic net worth in excess of a million bucks (depending on how early you want to retire).
Now, this isn't how you are used to thinking about your net worth - but it makes perfect sense. Your human capital is like a gold mine or oil well that you are going to slowly monetize over time. It isn't liquid or tradeable, but its value is very real.
Starting out at 25 with effectively zero, and attaining a net worth of $1M at 35 (forget 30) is going to have to involve some form of highly illegal activity, incredible luck playing the lotto, or marrying a millionaire with a weak heart.
MoneyGal - Thanks for the link! I'll probably burn most of the day reading that.
Steve41 and the-royal-mail
Thanks for your input! I do not really know what is realistic vs. unattainable so if you guys could help me work it out that would be great. I was just setting a goal that I could shoot for and see where I end up. I realize I'm starting out with nothing or a load of debt but I'm looking to turn it around over time. And I've got time. I'm looking to learn as much as I can about investing/real estate so if you guys have any books or places to help me get started that would great! I have a computer science background so financing isn't my strong point. But I'm learning.
So what would you guys recommend? What would be a realistic goal if I really just wanted to work for myself eventually?
Even though it may sound improbable, if you want it bad enough, it can happen. Although it's family net worth, we started at age 23 with a negative net worth, and now at 30 with almost half million. We expect to reach $1 million in net worth (or more) by 35.
For the average person of your profile, I think you can aim for the following:
1. pay off your student and car loans
2. save a rainy day fund of about $30K in cash and use it ONLY for life emergencies
3. max out your TFSA (you are allowed $5K per year starting with 2009)
4. max out your RRSP contribution limit (the amount shows on your revenue canada notice of assessement)
5. down payment of 20% on a house
6. stop racking up consumer debt effective immediately
7. forget about retiring at 45. That's not realistic.
8. move away from home now and let your life begin. get an apartment, call professional movers (don't mooch off your friends for this) and let the games begin.
In the next 10-20 years, you will have girlfriend/wife/marriage/kids/divorce, job loss, accidents, disability and broken down cars (which need replacing) all as possible obstacles to what you want to achieve.
The first thing you need to do is get a handle on your most important asset.... your 'career asset'. Determine a realistic salary that you could see yourself earning and, combined with a retirement age and a reasonable investment rate (commensurate with your risk profile). Then run the numbers, and see where your lifestyle level solves. This setting a dollar amount ($1M at age 55, say) drives me nuts. The important metric is lifestyle... that constant level of beer&grocery consumption you can enjoy pre&post retirement such that it takes you out to some ripe old age.
If you have a university degree in a 'power profession'... that $1M at age 55 is more realistic a goal than if you were a store clerk. The store clerk can certainly reach the $1M, but at what cost?.... living under a bridge and dumpster diving, saving his entire paycheck, could allow him to reach his $1M goal, but at what cost? These 'million dollars by 55' rules of thumb are silly... start with the basics.... what you have currently saved, what your paycheck expectation -over time- is. Start there, determine a reasonable lifestyle and the schedule/level of investing which will allow you to achieve that lifestyle.... forget the "$x million by age yy" thing, it is just not a realistic approach.
Your Money Milestones is a great, accessible book. Are you a Stock or a Bond?, Moshe's previous popular finance book, is also VERY worthwhile. I work for the company that created the calculators I linked to so, if you have questions about any of them, fire away.
Now, coincident with what Steve41 just posted, I'm going to add another perspective. You say you are in computer science, and you don't want to work longer than the next 20 years - fully 20 years before the "normal" retirement age.
This tells me you aren't crazy about the work you do. Right?
So one solution would be to invest more in your human capital, so you can find ways to monetize it that are "worth it" for you. Right now, you are planning on abandoning your mine while there's still lots of gold in it. But one key to happiness in life is to find work you truly enjoy.
I mean, that solution isn't for everybody. But I have never understood the undercurrent of "I need to get out as fast as possible from this job." Blerg! Better to find a job that actually fulfills what you are up to in life.