Yay! Another blog entry with Excel again! I’m telling you, this obsession with spreadsheets of mine is really hitting through the roof. BF has been complaining about the number of Excel sheets that I have and requested me to consolidated all of them into 1 master sheet.
Oh well. Guess it’s his fault for dating an Engineer. LOL.
Anyway, I previously blogged about my personal financial goals and one of them was to achieve a passive income of $3000 by age 40. You could be on two ends of the spectrum.
One, you are an investor with a very good track record. You look at this goal and you say “Walao, so damn easy to achieve lah. Don’t need Age 40, too long already. I’ve done it since Age 35 or earlier!!! Try to achieve something more challenging please.”
Two, you are very new to investing, probably haven’t started investing any at all, or you’re already near the age of 40 and you yourself aren’t anywhere close. You look at this goal and you say “Wa, is it even possible? Maybe $1000-$1500 lah, unless you have no financial commitment.”
Well, it is interesting because I actually belong to the second group. I’ve only recently started my investment journey last year and as new as I am as an investor, I think defining my goals should be essential to my journey and it will automatically lead me to the direction I that I need to take. If you’re wondering, I only have a portfolio with 2 stocks, one of it being Nikko AM STI ETF. ^_^
Talk about diversification. :p
So back to the title. How did I arrive at this number?
It’s easy! Just do some calculations and you’ll know how much you need to progress each year. Like I always say, the numbers don’t lie.
- My starting capital at Age 27 is $30,000.
- My annual investment sum is $30,000.
- My annual expected yield is 6%.
- I reinvest all my returns back into my portfolio.
- I stop working by Age 55, and therefore will not have additional money to invest.
Access the spreadsheet here.
I’ve placed a screenshot here for convenient viewing.
- By Age 55, I will have a portfolio of $2,209,193.95. This is together with my original capital of $870,000. My total returns by the time I reach the end of age of 55 will be $1,471,745.59.
- My starting capital is $30,000. I could invest more or less depending on how much I set aside for my initial investment at 27. This will change the result of my calculations and I may achieve my goal at a different age. Download the spreadsheet and try it out for yourself!
Now, my personal thoughts on the feasibility of this.
I wouldn’t say that this is an impossible goal. The math is simple, and to be honest, I think trying to achieve an annual yield of 6% is pretty reasonable. Other than that, my portfolio is purely based on returns. It does not account for growth. Neither does it account for possible losses in the event that I have bad judgement. I guess the difficult part would be to constantly have $30,000 annually for investment. As of now, it isn’t an issue but as I grow older, I would probably need to set aside more emergency funds if I have other financial commitments. Nevertheless, I’ll strive hard for this goal and review it every year to monitor my progress.
What about you? Maybe it’s time that you set a financial goal for yourself too. Share your goals with me if you have any by leaving a comment. I would love to know more! 🙂
Thanks for reading!
Miss Niao xoxo