Five years ago, I wouldn’t have thought it was possible that a quarter million dollars was in my reach. Even with plenty of setbacks (my shopping addiction and my DUI, for starters) I’ve still managed to hit my target for the year (knock on wood.) Next year, however, is the biggie.
I don’t think I’ll feel any different with $250k in the bank vs $200k. I certainly don’t feel any more stable than I did at $100k now. The $100k was a big turning point because then it felt possible to save serious sums of money. I think $250k will be the next big turning point in my financial journey, followed by $500k, $750k and — $1M, if I ever can get there!
The other day I put together a spreadsheet which noted exactly how much I’ll need to save per month to hit my $50k savings goals without the growth of my stock accounts. Basically, in order to hit $250k by Dec 31, 2013, I’ll need to max out my 401k and Roth IRA, and then save $3125 per month out of ~$4669 per month after tax and after 401K income. That should be doable. The good news is that doesn’t include any stock growth and it also doesn’t include any bonuses that I may be able to obtain during the year.
And really, I should be aiming for ending the year with more than $250k (maybe I SHOULD make my goal $275k – but that’s verging on impossible.) At some point my annual savings and interest targets must accelerate. $50k per year gets me to $1M at 46. BUT it will be hard to save $50k per year some years in the future – maybe I’ll want to take time off and have kids. Maybe I’ll decide to finally move into a place of my own and get decent furniture. Maybe I’ll lose my job and have to take one that pays less. All possibilities. The best I can do is save as much as possible right now when things are stable and my life is pretty cheap.
So I’ll be tracking my journey to a Quarter Million in the next 13 months. I’ll need a lot of luck to get there. But I can see next year being a major breakthrough year in my finances, or one that is extremely disappointing. It really can go either way.
What I’ll need to figure out is how much of my savings I want to put into stocks. Once I max out my 401k and Roth IRA, there’s the $3k per month in savings left over. Do I keep doing what I’ve been doing — picking stocks and ETFs and funds on my own, or is that plan stupid at this point? Well, it’s worked so far. I’d diversify of course, but still… will it be enough, or will I be throwing money away? I believe in taking risks BUT NOT STUPID ONES. But the only way I can encourage myself to save is to put money on stocks, because it’s exciting. I don’t day trade, but I like to follow the market. It’s why I’ve saved so much thus far. I get more thrill out of watching Apple swing up and down then living in a fancy apartment in the city. So, yea, if I lose $1k a month on stocks, it’s almost better than paying that rent. Either way it’s gone, and at least with the stock market there is a chance that $1k could be worth $1.5k down the road.
Oh, I also really want to buy a car next year. But I’m thinking if I put that off one more year (assuming my car actually continues to work) I’ll feel much more comfortable buying a car with $250k in the bank than $200k without knowing I can get to that goal. But I do really need a car.