My Personal Finance Journey

Personal finance observation, musing and decisions in a journey toward financial independence by 2020 with at least $3 million.

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Financial Goal Restated

Contributed by mm | July 7, 2005 9:47 AM PST

The recent review of my progress in the last three years prompts me to revisit my stated goal at this blog of (showcasing the journey of) retiring early by the age of 40 with a million dollars. When I started this blog back in 2003, $1 million means to increase my net worth ten fold and I considered it a long shot, but things have changed remarkably since then.

First, the million-dollar-by-40 goal is no longer a challenge at all. Adding the unrecognized appreciation in our house, we are sitting at probably $300,000 now. Plus, 2016 is still 11 years away, which means if we can keep the average saving rate of $61,000/year in the last three years, we can save to the millionaire club, and any investment income from the growing cashpile will only be the upside.

On the flip side, I figure out that I probably cannot solely retire on a million dollars. As shown in chart 5, our monthly household expense is growing from $4,645 in 2003, $5,475 in 2004 to $7,504 in 2005 H1. While recent spike may be affected by certain one-off factors, it is probably fair to say we may not retire comfortably on an inflation-adjusted annual budget of $45,000 in today's dollars even in a low-cost region.

Anyway, I never conceive an early retirement life as being a coach potato all year around. The million dollar should be the resource that frees me from the corporate ladder, and a new start in itself; it does not mean I will never earn a dime after the milestone. Particularly, PFBlog as a website makes me aware I can lead a meaningful life while pursuing my hobbies. Perhaps, after this journey, I can start a second career as, say, a part time financial advisor :-)

Hence, I'm making a change to the tagline of this blog:

Before: Personal finance observation, musing and decisions in a journey toward early retirement by 40 with at least a million dollars.

After: Personal finance observation, musing and decisions in a journey toward financial indepence by 36 with at least a million dollars.

With this change, I am, first, taking a big challenge -- $1 million by 2012 means I have to find ways to add more than $100,000 every year, and second, making it clear that the million dollar mark is not a stop sign, but a new beginning.

I feel excited about the new goal. Will I succeed? Please keep watching me at PFBlog.

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This Post Has Received 21 Comments. Share Your Opinions Too.

Jose Anes Commented on July 7, 2005

That is exactly how I feel about finantial independence.
Apparently we are following similar tracks.

jessica byus Commented on July 8, 2005

I'm a big fan of goal setting, and this site is such a motivation to stay head strong in your ambitions. I am 21 years old, and pretty much at the bottom of the totem pole right now just trying to make it through college majoring in financial management, but I love the thought of setting your standards high and then challenging yourself to take practical steps to reach your financial goals. Love the purpose of this site.

Foo Bar Commented on July 8, 2005

So I'm sort of curious why you are mixing hard and soft assets in the total of your $1mil goal. Soft assets, such as stocks, funds, etc, are extremely easy to divert to better investments and to control by yourself.

Your house, on the other hand, is stuck to the earth in a particular neighborhood, and isn't as flexible as your other investments. And at risk for natural and unnatrual events that are out of your general control. Sure, you can tap home equity lines of credit, but those have costs associated with them. It's like margin.

When I compute my net worth, I factor out hard investments like house, cars and the like.

mm Commented on July 8, 2005

Good question Foo Bar! You have to admit the hard assets have value ... I have pretty sophisticated accounting by adding depreciation and maintenance accrual monthly, and I have another metric to calculate the liquidation value (say, after sales commission if I have to cash out), so I believe I have a conservative estimate of the value of my hard assets.

However, it'll be very hard to measure month-to-month progress if I don't factor in assets like house and car. Buying a car does not mean I am suddenly $30,000 poorer, paying $1,000 extra toward my mortgage principal neither.

Unless the rest of world think a person with $200,000 cash is richer than another with $1,000,000 fully-paid house but nothing else, I do believe it is fair to include assets into the equation.

Marie O Commented on July 8, 2005

I just read about your blog in Kiplingers and I am hooked

Dan Commented on July 8, 2005

I'm getting a late start due to divorce. Your site is challenging me to hit the million net worth club in 10 years. I believe it is possible. Thanks for the inspiration. I too read about you in Kiplingers and I too am hooked.


Foo Bar Commented on July 8, 2005


I understand your comment. But any investment, be it a stock or house, doesn't really have value until you cash it in. And for a car that is used often, it depreciates. Unless it's a collectible and has some added value as such.

Cheers - nice blog too.

mm Commented on July 8, 2005

Thanks. Understand your point that car is not an investment -- guess you saw from my monthly report that I am deducting an amount every month from my asset account for depreciation purposes.

diancha Commented on July 8, 2005

Here is another idea for you - instead of including your home equity in your goal, try to achieve your $1M without it.

demc0 Commented on July 9, 2005

I agree with the approach of factoring out the home equity value when calculating net worth. Although your house has value it doesn't really help reach your ultimate goal of financial independance (unless your prepared to sell it and live in a tent).

Laura Commented on July 9, 2005

I love this site too! I too am going for the million dollar club, knowing full well that a million dollars is not enough to retire on. I'm happy to see that young people are taking an interest in their future and planning for retirement. I started investing at the age of 24 and am now in my early 40's and am halfway to my million dollar goal, not including my house. You absolutely must have goals in life, otherwise, how will you know when you "get there"? I see so many people in their 50's who haven't saved a dime for retirement, or have a paltry $50k in their 401k and think that's going to be enough? What were these people thinking? It's not that hard to save and invest, and the more you save, the faster it grows. Compounding is on your side, for the younger folks. I only wish more kids today would realize that. Thanks again for a great blog!!

mbk Commented on July 9, 2005

I agree with your assessment of net worth, although your home is not a liquid asset; it is a temporarily frozen asset that should grow with time. I am curious - Have you always been interested in personal finance, or do you have an accounting background or MBA?

I am aiming for the $2 MM goal by 55, since I am already in my 40's. Great blog - I also recently read about it in Kiplinger and have saved your link to review periodically. Thanks!

ken Commented on July 9, 2005

Agree that the $1M is looking too small, however I think you're being a bit optimistic to say it's trivial in the next 11 years.

And I still think the BMW's a troubling sign in your savings regimen - value is not a bmw trait.

Depa Commented on July 9, 2005

Financial independence, not "retirement" should be THE goal, IMO. $1MM does not typically get you there depending on your spending habits. $7,500/mo. eats through $1MM pretty quickly.

Hard assets should be included in net worth albeit conservatively.

My goal (which is set to be achieved in 1 month @36 yrs.) is $1MM in net worth. Was at $130K in net worth at 29 yrs. and didn't get rich on the NASDAQ (got killed) or anything other than patience and living below our means. The next goal is $1MM excluding home equity. After that, $2MM excluding home equity. And so on...

nickel Commented on July 9, 2005

While I understand your reasons for tracking your net worth the way that you do, I prefer to ignore things like home equity and the value of our cars when figuring net worth. No good reason for this. I guess part of it is that a more conservative estimate just pushes me to do better.

Tim Commented on July 9, 2005

Glad to see things are going well. Retiring at 40 would be boring, anyway. It is well-documented that people who retire early, die early as they don't have anything to live for - and aim towards, anymore.

Arbee Commented on July 10, 2005

I disagree with not including home equity in the net worth statement. The reason is a fully or partially paid home provides an imputed income i.e. It allows you to pocket the rent that you would have otherwise paid. The beauty of imputed income is that you don't get taxed on it.

Canadian Capitalist

Jerry Commented on July 17, 2005

You are correct to include your home equity as part of your net worth. When we bought our most recent home we sold our paid-for home and took some of our savings to invest in a new residence in California. We had a choice of having a 400k or a 200k mortgage. We reduced our savings and went with a smaller mortgage. Although our soft assets were reduced, our overall net worth has increased substantially since the home has double in value. To not include our home value when calculating our net worth would greatly misrepresent our progress toward financial freedom.

Andy Commented on July 17, 2005

I came across an article in our local newspaper about you, this site and others. I have a couple of questions that relate to my future and direction in life. I am currently employed in a small automotive repair shop that is up for sale and is closing when sold. I have been out of school for three years. I have a two year associates degree in automotive. I have found that I like working on cars as a hobby, not as a profession. I have taken aptitude tests at a local college for pointers in other interests of mine. My test results said I have interest in financial analyst/economist, CPA, building inspector, and a crime scene investigator fields. I have already ruled out the last two due to being underpaid and the environment I would be in. I am entertaining the idea of going into a small business for myself. I would like to start up a home inspection service. This is where the questions come in. If you had the option to go into business for yourself or go back to school and work for someone else, what would you do? I have researched some of the requirements of a small business startup. There are the pros and cons but that seems to be the case with everything. My goal is to be well off in life. I'm only 23 and I would like to make my full time job attending to my investments and enjoying life rather than working to make someone else richer. I'm finding that I'm sitting on a fence and not sure what to do. What's your recommendation on how to efficiently achieve my goals.

ZGD63 Commented on July 18, 2005


I found your blog mentioned in our local paper (syndicate pick up from WSJ, I believe)and was alarmed at the similarites between you and my older brother.

He too set a $1 million goal for himself by age 35 and made it. You should have seen his face when there was no parade, trumpets, etc. It seemed hollow to him since that what had become his life's purpose. And because there are so many more millionaires today and it doesn't have the same status it used to, he decided to work on his second million so he could be called a multi-millionaire.

He has sacrificed health, relationships, and basically life itself in pursuit of this goal. He says he's very unhappy and that the only thing that makes him happy is making money.

He could basically live off the interest his money makes him and experience more that life has to offer. But he can't help himself...he's hooked like a junkie on smack. And because of this, he uses a horrible outlook of taking advantage of situations and/or people if it saves him money so he gets to his new goal quicker.

This is like any other addiction and has all the classic signs of such..esp. the needing more to get the same feeling.

Be very careful that your pursuit of money doesn't overtake your life and become your sole focus as well. We only have one time around so we need to make the most of it and have balance.

I do think being future oriented in regard to finances is prudent and starting early in life is the best route, so kudos to you. My very young children already have several investments and have been taught to negotiate interest rates! I'll counsel them about saving for something special as opposed to having everything now. But I won't let them become addicts.

mm Commented on July 18, 2005

Hi Andy,

Thank you for the mail. I cannot give you a general guidance as of which option is better. I sense that you are leaning toward the business owner track. If I were you, I will consider the following points:

- Do you have the necessary success factors of being a business owner?
- Have you done a thorough study of the home inspection business and figured out your plan?
- Do you have the necessary financial/networking resources to start the business?

Especially, I found it is pretty conflicting that you don't want to be a building inspector yet you want to start a home inspection business. Many home inspection businesses as far as I know are one-man shops, and I don't think you can success if you don't do the inspection yourself.

I don't mean to discourage you, but I will recommend you to spend time to write a business plan before committing money and time to start the business. I have started two businesses several years ago and failed miserably, but now I know what it takes to succeed, and I will spare my chances for the very best opportunity only.

Good luck,

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