5-Year Net Worth Projection

This past month I started to discuss my monthly net worth (June 2016 Net Worth Update) which was $127,577 (conveniently calculated using Personal Capital).  I think my family is making good progress, seeing increases of $1,000 to $6,000 per month.  In order to keep moving forward, you need to take a forward look on things.  There is nothing you can do about what has already happened, but you can make decisions that impact your future self. That is why I developed a 5-year net worth projection. Technically, I have a 30 year projection but that is full of assumptions as to what might happen in our personal and financial lives.

Net Worth, Net Worth Projection, Assets, Net Worth Growth

The table below provides a view of my projected net worth gains in 6-month snapshots over the next five years.  I debated on the right time frame for this table. I arrived at five years, as it seemed both close enough to be realistic to project but far enough away to show meaningful growth. (assumptions underneath the table).

5 Year Net Worth Projection Table

Net Worth, Net Worth Projection, Assets, Liabilities, July 2016

Key Assumptions:

    • 7% return on 401k/IRA
    • 2.5% appreciation on our house
    • Max out 401k starting in 2018

Near-Term Focus

We are aggressively paying down my wife’s student loan debt. That effort will absorb any extra capital we have between now and November 2016.  Once we have her student loan paid off, we will have to reassess how to allocate the extra capital.

Next Steps

I am currently considering three options on how to direct this capital come November/December:

      1. Direct it toward the Roth IRA – This would give us  more flexibility if we decide to pursue early retirement (tax-free penalty free withdrawal of contributions after 5 years) while also saving toward a more traditional retirement.
      2. Begin aggressively paying down our $18,870 car loan – This would reduce our overall debt, but we could sell the car at any minute and wipe this debt away.  I would rather focus on putting additional capital toward an appreciating asset (investment, pay down mortgage debt) or in cash.
      3. Start to save cash to either grow our emergency fund or begin to invest in dividend producing stocks – I am happy with our current emergency fund but would like to keep it as roughly 10% of our net worth up until about $20,000.  My interest in generating passive income through dividend producing stocks has really grown since I created this blog.  When I began reading other blogs focused on dividends (Dividend DiplomatsThe Dividend Pig, and ItPaysDividends to name a few) it really opened my eyes to the power of dividends.

I have plans for an article on paying off my wife’s student loans for this Fall.  I will be looking more at this additional capital discussion then.


All in all, I am pretty pleased with this projection.  If I could lock in this type of net worth growth, I absolutely would. This breaks down to roughly a $5,000 increase per month. In my projection, most of this is coming from our 401k contributions and growth with the remainder coming from our minimum monthly debt payments.  My goal is to update this post every six months to align with the table above.  This will allow for a comparison of my projection versus the actual values.

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