Mornin’ y’all. I wanted to take a few minutes and share with you guys something that I’ve spent quite a bit of time creating lately (don’t tell my boss please ;)). For a little over t years now I’ve started off every work day by logging into Personal Capital and logging my net worth in a spreadsheet that I made for my personal finances. A few months into this schedule I started breaking it out and noting how much I had in each type of account. i.e. Bank Accounts, Credit Cards, Mortgage, Home Value, Investments. So, now I have almost two years worth of data summarizing the nearly daily change in our investment situations.
Up till now I’ve been using these daily values for some other things in the spreadsheets but not very often, and I had never really looked at the story they tell as a whole. But now I am going to unveil to you the whole story they have and how I’ve found to use them more effectively.
Introducing my Progress to Target Graph.
Shortly after I started tracking my investment position daily I turned 27 and set myself a series of financial goals. One of the long term goals that I had set was that I wanted to have a net worth of $500K in 10 years. Since then I’ve re-evaluated that as being too easily achieved and instead set myself a stretch goal of reaching my ER (Early Retirement) number of $780K by age 37 instead.
Really? Being able to retire at age 37 when I didn’t graduate from college and begin a real career until I was 26 while raising two kids (and hopefully more) on one income of around $60k a year? I’ll agree, it sounds pretty lofty, but I’m also pretty confident that it can be done if I can play the cards correctly.
Like any worthwhile goal that you are going to go out and actively pursue though, I needed a way to track my performance and see how I am doing compared to where I need to be at to achieve the goal. So I tapped into my two years of basically unused data and created this graph.
This view shows me the trajectory that I need to maintain to reach my goal within the 10 year time frame. As you can see. After the first two years we are maintaining the path and keeping our heads a little above water. But it’s also clear to see that the road ahead is going to become increasingly more and more difficult to maintain as the compounding returns start to increase the slope of the line towards the end. That’s why it’s crucially important that we can set a solid foundation now and get as much set aside in investment vehicles as possible so that we have something bringing in the needed returns later on.
However, while it’s nice to keep an eye on the big picture like this it is too difficult to see the small movements from this view. This is why I more typically look at this view which shows just the time period that we have completed.
From here we can more easily see that over the past two years we have had times where we have been well above the line, then after purchasing a car for my wife with cash and a downturn in the market we have had months where we were clawing our way back up out of the whole. But luckily the market has done good lately and our cash position has remained stable and thus left us with a nice little $3,500 buffer over the target. While I’m painfully aware that this could dissipate very quickly, we at least now have a way to measure and track how we are performing relative to our goals.
Now it’s your turn. Try it out. Make a little graph to track your performance relative to your goals. (If you don’t have any goals like this set then please take some time to do so. Here are some articles that might help you get going: What Is Your Motivation?, SMART Goal Setting, Developing Your Action Outline). Then if you need some help setting up a graph let me know but I think that it’s more beneficial for us to build our own spreadsheets so that we understand the processes involved in updating them, otherwise we won’t do it and it will be of no benefit.
By way of information, I have chosen to include all of the money contained in my checking and saving accounts, all investments, and credit card liabilities in this number that I am tracking.
Have FUN with it!