Net Worth Projections

I have been doing some analysis of how to best estimate the potential growth of my net worth. This is to try an answer the question of "how much money will I have when I'm 33, 34, 35 etc. years old. It will be nice to try and celebrate the smaller successes along the way to achieving my goal. Celebrating every six figure amount is nice. I am heading close to the $200K range as I write. This exercise is also an attempt to try and determine if my current path will allow me to hit my goal of having $1M by the time I'm 40 (Feb. 2017). This exercise or analysis has been very interesting for me and reveals a lot about how the future will play out.

I have taken a look at several ways to come up with a good predictor. Right now I have decided to compare the growth of a set rate of return on a monthly basis (1.5%) versus an increase of a set amount of money (how much I save) each month as well as a specific rate of return (8% annually or .0066 a month). The past several months I have been able to save at least $3K dollars a month and hope to get about 8% return from all my investments.

An important note is that since tracking my progress I have beaten this growth rate on both accounts almost every month. I have somehow been able to save more and gain a better rate of return. However, I believe that there will be good times and bad on the road ahead so I should account for that somehow. I believe that both of these methods have a strong a potential for becoming my baseline from which to compare my progress. I have highlighted in the spreadsheet below my birthday which is in February as well as the $100K milestones.

As you can see the 1.5% column on the left does not beat out the $3K plus 8% return. However, as time goes by the advantage shifts to the 1.5% growth column. In June 2016 or in the $700K range the column on the left or 1.5% growth has the advantage and takes the lead for ever more.

As the my net worth increases the advantage becomes even greater. If I draw the numbers down until I'm age 50 the discrepancy is over 50% in favor of the 1.5% growth column.

In February of 2027 when I turn 50 the 1.5% column reads $5,365,340 while the $3k in savings plus 8% annual return column only reads $2,420,486.96. This is amazing if you ask me.

Some takeaways from this analysis so far are:

1. Saving the first 700K is influenced more by my ability to save money. From this point on it is the true growth or rate of return from my investments.

2. Based on these two predictions I will fall short of my $1M dollar goal by age 40. I turn 40 in February of 2017. At a 1.5% increase I will have $898,818.97. At $3K a month plus 8% return I will have $851, 058.98. Either of these numbers would be something to be proud of by the time I'm 40, but most definitely falling short of my goal.

3. More to follow as I ponder these numbers.

Any thoughts?