Show me the mooooneeey!
So, if you’ve read The Story, you know that I’m a saver. If you’ve read The Plan, you know that I’ve managed to pocket 400.000 DKK ($62.000/€53.000) so far. If you’ve read The Budget, you know that we currently burn through more than what’s currently in my pocket, in a single year. So, how is this all going to pan out?
Well, I’ve set myself a conservative goal, to set a side a minimum of 5.000 DKK ($770/€666) per month for the next 15 years. If I can do this, and also manage to invest my nest egg continuously, and yield a minimum interest of 8.33% per year on my investments, then I will reach my goal of having 3 million DKK (approx. $470.000/€400.000) in my bank account in 15 years (give or take). This is all possible, due to the magic of compound interest (there’s no magic involved – it’s pure math).
It’s that simple, really (see compound interest calculation below):
The table above depicts the “settings” that I’m gunning for, in order to reach my goal of a Total Balance of 3.000.000 DKK.
The graph below clearly shows the power of the compound over time (look at the green bars):
So, hotshot – how do you intend to secure a 8.33% interest of your nest egg continuously over the next decade or so?
Wow, what’s with all the hostility, man?
Historically, there are several asset classes that can yield you these kind of returns. However, as we all know – history does not give you any future guarantees. We’re gonna have to roll the dice here (figuratively! – Not literally! You were on the way to the Casino, were you? 😉 )
Any decent investment strategist will tell you that rule #1 in investing, is to spread your risk as much as possible.
So, over the coming months (and years), I plan to do just that! Currently my entire nest egg is sitting in a bank account with a 0.70% interest rate. That’s not really gonna get me anywhere near my Total Balance goal, so I need to find some solid investments to put some of the money into.
I’m thinking real estate, primarily. – But since I have to spread my risk, I can’t put all the money into real estate. Or can I?…
* The images above is provided courtesy of nerdwallet.com (try the calculator for yourself – it might be an eye-opener for you too!)
EDIT: This post was written in September 2018. I’ve since revised the plan, and I plan to revise/revisit it every year, as I get closer and closer to my ultimate goal. See the latest update on the “the dough” here.