As title. I want to reach a net worth (excluding any mortgage debt) of 1 M $ by the time I am 30. Is it possible to do so? What strategies would you advise?
age: 26
TC: 220k with an average yearly increase of 20%
current net worth: 220k
no mortgage
car loan of 18k
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comments
I’m in Ca so around 30% tax rate.
Obviously, 5 is beyond us to predict. 1-4, though, op has control over. I agree with you that those are challenging but still doable. Op is in an environment where 20pc comp growth is possible.
I was a poor grad student at 26 which helped with not splurging but it’s certainly possible.
A car loan won’t break op either way so that isn’t a big deal to me.
Taxes probably won’t change very much from where they are today and op will have to stay disciplined. It’s certainly possible to save a big chunk of post tax income with discipline.
I was very naive at 26, young, hot blooded, impulsive, and a high TC got to my head. Also as an immigrant, I had responsibilities back home where I had to divert my funds too.
No regrets of my spending but in retrospect much of the money I spent could have been put into growth investments would have added a lot more to my NW today.
To reach 1m in the next four years, you'll need to focus on decreasing your spending.
What percentage should I save?
With those aggressive net worth goals, I'd say you probably should have bought a cheaper car to begin with. You'll have to do the math on what spending you can get away with. In general, a penny saved is more than a penny earned, after factoring income tax. So if you could cut your annual spending by 20k, for example, that's like a 30k bump in comp.
Since your TC is much higher. You have an opportunity to save a lot more than i could
Here’s another equation for calculation. How much is your liquid net worth versus your gross income (Box1 on W2). Right now my liquid NW (not including properties) is 40% above my total gross income through 2019 since the day I graduated from college