Tuesday, May 20, 2008

Income CAGR

There is an interesting article over at Free Money Finance on income growth.


It suggests a strategy for growing your income, based on the authors twenty years of experience. The strategy can be summarized as follows

  1. Get a professional qualification.
  2. Actively manage your career.
    1. Ask for raises
    2. Promote your work and contributions, especially to your bosses
    3. Outside of work, expand your skills and contacts
    4. Switch to higher paying jobs
    5. Don’t settle for the initial offer in any negotiation
  3. Turn your hobbies into income
  4. Spend less than you earn and utilise the power of compounding growth.
I was pleasantly surprised to find that, without any specific intention, my strategy over the last ten years, has been almost identical to the authors. The only minor differences being in professional qualifications (Mine is a CISSP not an MBA) and CAGR (Mine is 24% not 13.78, although mine is measured over 10 years and not 20).

Though I did not have the specific intentions his strategy suggests, I did have the goals of retiring early, earning a "large" salary (which I eclipsed three years ago and replaced with a new goal) and now my more ambitious goal of attaining NZD 1,000,000,000!

My strategy can be summarized by this simple statement.

Set goals and when you reach them, set new and more ambitious ones.

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Wednesday, March 05, 2008

Net Worth - March 2008 + $138,201.15

I have been incredibly remiss in updating this blog. The only excuse I have to offer is that since January 2007 I have been planning (and saving) for a wedding! I have still been tracking my Net Worth and my plan to get to 1 Billion NZD is definitely still on track, although I forsee rocky times ahead unless I fine tune my strategy.

Discretionary Funds NZD 9,651.17
Credit Cards/Loans NZD 21,165.22
Loaned NZD 1,193.28
Wedding NZD 13,015.30
Mortgage NZD 1.00
Bond NZD 2,697.38
Holiday NZD 7,423.98
Car Value NZD 18,559.95
Sub Total NZD 31,376.84


Buffer NZD 38,760.68
Gold NZD 2,684.21
Property Equity NZD 2.47
Stocks NZD 65,376.94
Sub Total NZD 106,824.31


NZD 138,201.15

As you can see below I have met and indeed exceeded my goal to grow my existing capital by 20% each year. However this target this is going to become exponentially harder to hit as my capital grows, and my income contributions shrink in relative terms, as for now my investments aren't growing at a sufficient rate to meet my goal.

However all is not completely bleak, as I have manged to grow my capital a healthy 117% from December 2006.

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Monday, December 11, 2006

Net Worth - December 2006 + $63,679.21

I have been tracking my net worth for a while, but I have never seperated it into debt or asset classes. This will be absolutely critical for rebalancing my portfolio.

As of 01 December 2006:

Discretionary Funds NZD 7,271.01
Credit Cards NZD 0.00
Loans NZD 0.00
Mortgage NZD 0.00
Sub Total NZD 7,271.01

Cash NZD 25,632.40
Property Equity NZD 0.00
Forex NZD 15,925.91
Stocks NZD 14,849.90
Sub Total NZD 56,408.20

Total NZD 63,679.21

The only real significance here is that I have no debt. I aim to keep it that way if possible. The only debt I would consider is a mortgage, but even then I would have to think about it quite hard.

I know some would argue this point and I welcome some healthy discussion.

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Sunday, December 03, 2006

Some more perspective

Just to make it clear, I am only aiming for one billion New Zealand dollars net worth, just in case you thought I was a raving lunatic.

So just how far am I away from this lofty goal which would place me 2nd on the NZ rich list:

Cash 68.03% NZD 38,460.67
Investment 31.97% NZD 18,077.27
NZD 56,537.94

Quite a way to go... but hey I have a plan.

Step 1 - Quit my job.
Step 2 - Profit.

OK, I may have skipped a few steps there, but anyway...

The first thing I need to do, before giving a two finger salute to my boss, is to start generating enough passive income to cover my living expenses and go toward future investment. I have determined this amount of money to be 400,000 NZD a year. Currently I am generating about 3300 NZD a year passively, so I have a way to go yet.

I also want this income to be rock solid stable, so the majority of it will be in income providing type investments. I realise this might make my ultimate goal a bit more tricky, but hey I've got the rest of my life to get there!

So the magic interim figure I am aiming for is 10,000,000 NZD using the tried and true formula of 25 x planned retirement income.

More on how I'm going to get there later.

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Monday, March 06, 2006

One Meeelion Dollars

Every time I hear or read of a new way to make a million dollars, my brain automatically drifts to that famous scene in Austin Powers where Dr Evil tries to hold the world ransom for “One Meeelion Dollars,” only to have it politely explained to him, by his minions, that due too inflation “One Meeelion Dollars” was not the magical figure it used to be.
One million dollars in 2006 would have been worth $161,101.62 in 1966 a mere 40 years ago.
As the title of this blog may indicate I’m sick of thinking in such paltry terms as seven figures. I’m aiming for ten figures in my lifetime. And I’m going to do it in the least exciting way possible, by growing my capital by twenty percent each year until I reach my goal. My initial calculations indicate that I will be seventy one years young when I reach this figure.

Sounds absolutely preposterous, doesn’t it. Many of you are no doubt thinking, what a greedy bastard; he doesn’t need all that money! No doubt you are right in thinking so, but let me put this ghastly figure into perspective. One billion dollars does not even come close to equalling the charitable donations of one Mr Bill Gates, in any given year! So really my goal is quite modest all things considered.

My first medium term goal is to generate enough of a passive income that I can stop working. Seems like a strange thing to say, that I need to quit work so I can make money, but it is true. At the moment I spend too much of my time worrying about work and not enough time thinking about how I’m going to make a billion dollars. If I can start generating enough passive income to meet my living costs and to continue building by capital I can retire and start focusing on my goal.

My second goal, which is both short term and long term, is to work out how I’m going to grow my capital by twenty percent in the next year and of course until I reach my final destination. One billion dollars.

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