Hi folks! Time for a status update on one of my first posts written. Back when I first jumped onto the blogging scene, I wrote a post in May 2016 on my net worth explosion as I just reached the double comma club. Well today represents the sequel, the net worth chain reaction! 🙂
Back in the original post, I wrote how The Green Swan is a lifestyle: Work Harder, Work Smarter, Retire Earlier and Find Your Beach! The tagline fits and it is the lifestyle I’ve lived. Make more money, save more money, and invest to win.
The Four Year Rule
I also introduced my four year rule in the original post. As a refresher, my goal along the journey to grow my net worth was to double my net worth every four years. Let’s put some context around this. The widely known Rule of 72 is a measure of doubling time. Say your investments have grown at an 8% growth rate, that would mean it would take nine years for that investment to double via that rate of investment growth alone (72 / 8% = 9 years).
My Four Year Rule is saying that in conjunction with investment growth, my net worth also grows by saving money and adding those incremental contributions to my investment account. So my net worth will grow by investment returns and investment contributions.
When establishing my four year rule, my starting point was nine years to double as I expect over the long term my investments to grow at 8%. That’s what my invest to win article was all about. To get my doubling time down to four though, that means I need to contribute big money every year. And to maintain the doubling time again and again, that means every increasing contributions year after year.
Granted, it is a little easier to attain this goal early on in the journey given the rule of small numbers. More of the growth can be attained by simply saving more early on, whereas further along it requires more emphasis on investment growth or bigger and bigger salary bumps to allow a higher amount of savings. The math is simple, but achieving the goal can be tricky.
Net Worth Status Update
Well I’m getting to the point where it is getting tougher and tougher to attain the four year goal. Back in April 2016, having reached the $1 million net worth mark, my next goal would be $2 million by April 2020. Today I am two years in…so how am I doing? Below shows Lucy and my net worth tracker for the last 12+ years.
- Starting in 2006, with a net worth of approximately $60K, it took us 2 2/3 years to double and reach $120K (around August 2009).
- To reach $240K, it took another 2 years (around August 2011) thanks in part to a strong uptick in the markets.
- To reach the next doubling point of $480K it took 1 2/3 years (April 2013) attributable partly to a good stock market and also a continued ramp up of our salaries (and therefore more cash to invest).
- In March 2016, we reached $960K which was the next doubling point. This took right around 3 years.
So far, we’ve successfully doubled four times. Resetting that baseline to $1 million which we reached in April 2016, that obviously means we need $2 million by April 2020. Two years, I can say we are firmly on target! At nearly $1.6 million we are over half way there. Fingers crossed we can keep things going and reach our fifth straight double in less than four years.
Can the Chain Reaction Continue?
How’d we get to $1.6 million and is it sustainable? Since April 2016, the S&P 500 has increased over 36% (dividends reinvested) and an annualized return of about 17.5% (dividends reinvested) which serves as a proxy to how my overall portfolio did during that time. So the market expansion has certainly helped!
Also, over the last two years we’ve contributed somewhere around $250K. I don’t have this figure exact because I track this on an annual basis; tracking mid-year from April isn’t in the cards. We’ve done our part too!
If we invest another $250K in the next two years, that will get us to just over $1.8 million and leave the market growth to pick up the last $200K or so. That is definitely achievable.
The bull-market won’t last forever, but the economic fundamentals are looking good right now. Unemployment is low, folks are making good money, tax reform helps; but there are some headwinds too. Interest rates are rising, trade reform is a wildcard, etc.
Who knows what will happen during the random walk down Wall Street. I’m not going to fret about it though. If the market doesn’t hold up or if we fall into a recession we may miss this four year goal, but things always bounce back and that might mean we make the next four year goal even faster.
Thanks for taking a look!
The Green Swan