As my long-time readers know, my “impossible” goal of hitting $500,000 in individual net worth before I have my first child is somehow within sight. It’s still seemingly impossible, but I always aim high and see how far I can get. I’m not pregnant yet, so that gives me at least nine months to get there. Below, I’m going to detail my budget plan to take me from where I am today to where I want to be before my first child is born.
On 7/15/16, my networth calculations = $379,412.
This leaves $120,588 to save prior to having children.
For the sake of simplicity, I am going to say that I will have my first child – at the earliest – in 2017, getting pregnant in January. This means that from today until the day I give birth, I would at the least have 14.5 months – I’ll round that up to 15 to make the math easier.
That means I need to save $8600 per month for the next 14 months starting in August to achieve my goal (combination of savings and interest earnings.)
Here is how I am going to get there… in theory…
Income non 401k months = $9000.
August – December (net worth increase goal = $43,000)
5 Months After Tax Income = $45,000
– Rent = (-$6750) = $38,250
– Food = (-$5000) = $33,250
– Clothes/Personal Care = (-$2000) = $31,250
– Health = (-$5000) = $26,250
– Travel/Entertainment/Gifts = (-$1000) = $25,250
– Bills, etc = (-$500) = $24,750
This leaves a gap of $18,250 to make up for in next 6 months, or with interest.
Income 401k Months = $7000 after-tax income
January – June
401k pre-tax Investment = $18,000
6 Months After-Tax Income = $42,000
total income = $60000
– Rent = (-$8100) = $51900
– Food = (-$6000) = $45900
– Clothes/Personal Care = (-$3000) = $42900
– Health = (-$6000) = $36900
– Travel/Entertainment/Gifts = (-$3000) = 33900
– Bills, etc = (-$600) = $33,300
$33,300+$24,700 = $58,000
Ok, so in the above scenario – without any increase in interest from my investments, my networth as of having my first child next June would be approximately $437k, not $500k.
Now, to actually get to my goal there I’d have to find a way to save an additional $63k in the next year. AND, this is all very hypothetical based off of keeping my job for another year, which is unlikely, so I probably won’t even get close to these plans anyway – but knowing the numbers certainly does inspire me to try my darnedest to keep my job until I have kids. It’s the only way I’ll get close to my net worth goals.
Assuming annual growth on current networth of 5% (which can be off since it can definitely go down too) that’s $18,000, making the gap “only” $45,000. If I wait six more months to have kids AND keep my job during that time, I can probably get pretty close. So, in order to achieve my goals I need to —
- keep my job and current income with no breaks in it until January 1, 2018
- save at a minimum the money listed above per month or ideally spend less than this budget
- keep investing in the stock market so there is a chance the return over the year will be at least 5%
- wait until March to get pregnant – at the earliest – so I have more time to increase networth
I think this is actually all somewhat do-able if I follow the steps above, most importantly, step 1. I also could seek supplemental income but at this point I think I’m better off focusing on doing well in my current job and keeping that as long as possible. Once I get to $500k, life will be a lot less stressful. It’s not like I’ll be able to afford a house here or anything, but I just feel like $500k is the right insurance for my mental health issues, especially before I have children. I hope I can get there.