The Road to Wealth (part 3 — €60k): Expectations

In the last post, I went over the exact steps I need to take to achieve my €200k wealth goal. They were:

• Get a job.
• Save money and invest.
• Repeat until I have €200k.

Sounds simple enough. No doubt life will get in the way at some point and things will get more complex, but I’ll deal with that when the time comes. For now, let’s have some fun and speculate about what my financial condition will be in a year or so.

My assumptions are this:

• I will have a job at the end of December at the latest (i.e., within now and three months).
• I expect to earn €30,000 p/a (net) in my first year of working.
• I expect to spend €20,000 p/a.
• The yearly returns on my stock investments are 10%.
• Due to an inheritance, I will receive an additional €1,700 (net) each month for the next 10 months.

Most of my savings early on will come from this extra €1,700 inheritance money that I get each month. It’s a €17k boon spread out over 10 months and it will go straight to my savings.

(I realise that this extra €17k is not something that everyone has access to. This undoubtedly makes my journey less relatable, but so be it. I want to give you the truth, and the truth is that I lucked out with this extra money.)

With these assumptions, I can make a projection about how large my portfolio will be at the end of this year and the next:

Dec’21:

• My starting point is the €60k portfolio that I have currently.
• I am conservatively assuming that I remain unemployed until the start of 2022.
• My €1,700 inheritance money will (roughly) cover my expenses, so I am assuming €0 savings (i.e. no withdrawals).
• My assumed 10% annual return on investment equates to a 2.4% return over a three month period, so in this period my €60k portfolio will grow by approximately €1k.
• This means, at the end of this year, I should have €61k.

Dec’22:

• I assume to have a job paying €30k p/a; my expenses are €20k p/a. This equates to €2,500 in monthly income and €1,700 in expenses, resulting in savings of €800 p/m.
• For the first seven months of the year I will continue to receive €1,700 per month in inheritance money. Therefore, my monthly savings will be €800 + €1,700 = €2,500 for the first seven months and €800 thereafter, or €21,5k for the entire year.
• For simplicity, let’s assume I earn 6% on the €21,5k (due to the savings not being invested in lump sum, but instead being spread out over the year, with a skew toward the first half of the year when I am still receiving inheritance money). This equates to an additional €1.3k. On the €61k I started out with, I assume the full 10% growth rate (because this is invested for the full year), or €6.1k.
• Putting it all together: Income from savings: €21.5k. Income from investments: €7.4k. Total increase in wealth: €29k. Starting portfolio: €61k. Ending wealth: €90k.

So in December 2022, I expect to have €90k.

That was fun! Do note, however, that these are just projections. My wealth is entirely dependent on the short term gyrations of the stock market, and a widespread downturn (or just a downturn in the stocks I own) could mean I end up with a much smaller sum. I’m fine with this inaccuracy — this calculation was just meant to provide me with a reference point.

So how about 2023 and thereafter? I don’t know. In fact, I have very little doubt that my 2022 €90k estimate will prove to be quite inaccurate, so there is no point in trying to make detailed calculations that are even further out in the future. But let’s just say that I hope to reach my €200k goal before mid-2025 (which is when I turn 30).

That concludes the third part of my blog. I have now laid the groundwork for my project:

1. The goal: a €200k portfolio.
2. The plan: (i) find a job, (ii) invest savings, (iii) repeat until goal is reached.
3. The expectations: (i) employment within 3 months, (ii) €90k reached at the end of next year, (iii) €200k reached before my 30th birthday in mid-2025.

Now all that’s left for me to do is to work hard and try to reach my goal.

As for this journal, I plan to make periodical ‘update’ posts to talk about how the portfolio is doing, the stocks in it, the jobs that I’m working, etc. But I might also be tempted to post non-Road to Wealth stuff from time to time. Musings about investing, career, life. Who knows.

We’ll see what the future brings. Right now, I’m simply enjoying the process of keeping a public journal.

(And I hope you enjoy reading it.)

Godspeed!