The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: skip207 on April 13, 2019, 03:01:30 AM
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Those that have been tracking your net worth how long does it take to double?
I only started tracking on a monthly basis in Jan 16 and by the end of this month I will hit 2x net worth from 1st Jan 16 to 1st May 19.
That's 3 years 4 months.
The reason I ask is my "number" is 850k. I am now at 575k. My FIRE date is 3 years. So if my net worth was to double again in 3 years 4 months then my "number" will come a good bit sooner than my FIRE date. If you see what I mean. This is not in my plan.
How do others find this works out?
I have gone back and tried to fudge the numbers from zero to where I am now and it looks like its taken me the following
0-100 - 8yr
100-200 6yr
200-300 4yr
300-400 2yr
400-500 1yr 1mo
But this is where the numbers stop working, because I have been in the 500-600 band now about 13-14 months and I think it will end up being almost 2 years, so its like I am going backwards. So was that 3 years 4 months a fluke to double the net worth or is that about right?
Sorry if none of that makes much sense!
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The most honest approach would be to look at the components driving net worth individually. Those would be savings rate, expected changes to income and expenses, and rates of return on assets.
With regard to the last one, I expect equities to return 10% before inflation (aka nominal) over a very long time. That implies a doubling every 7 years or so. You ignore inflation at your own peril however. Assuming a 3% inflation rate, the inflation adjusted return (aka real) drops to 7%. At that rate, it takes 10 years to double.
PS... Rule of 72 makes quick and dirty doubling calculations easy (reasonably accurate between 4% and 14% I think). E.g. 72/10%=7 years to double. My dad taught me this in high school. Thanks Dad!
Achieving a doubling in 3 years is awesome and congrats! I think you can look back though and see why this is complicated. Personal capital reports the sp500 rose 40% between Jan 2016 and now. Clearly you were very lucky with returns or you've been saving a good bit.
As your stache grows, the time to double will drift toward the expected rate of return rather than be dominated by savings rates as early on.
Or so I've been telling myself for at least 11 years, probably longer.
I've tracked net worth religiously since about 2003 (and sporadically before that). I did some math a while back starting from when I got married in Jan 1 2008 and we've doubled (nominally) 3 times in 11 years or once every 3.7 years starting from a base then of $200k. And if memory serves correct, I was doubling at about the same pace before getting married.
Every time it happens, I tell myself it can't continue like this. Until very recently, our income growth was around inflation. We had a bout of unemployment in the great recession. A self funded move supporting two properties to land a new job. A multi-year 40% cut to my salary when my business struggled during the great recession. We've never used leverage meaningfully. Our homes have averaged returns of about 4% nominal overall, just barely above inflation. The only things I can point to are increasing frugality (except offset by kiddo), side hustle, and a recent sale of my business which really didn't move the needle that much.
I don't think we could double net worth in 3-4 years again. But I've said that before.
Here's a big picture view of it using our situation. I bet we have an average income since marrying of around $150k gross (3x annual household marriage). Playing with an investment calculator, saving about $72k per year from a base of $200k and with nominal returns of 7%, we hit our target of $1.6m today. I think that sounds like a typical savings rate for us across the period but it's been pretty variable.
In my spreadsheet, I record a monthly narrative synopsis. E.g. sold old car, bought new, market sucked, increased retirement contribs, executed Roth conversion, etc. I think the story matters a lot. I'm sure if I looked at each doubling it'd look like this:
2008-2011 : got married, 1y unemployment for each of us (huge pay cut for me technically), bought new home and left old idle for a year then a cash flow negative renter to wait for real estate market to improve. Looked dire yet frugality saved the day and let us retain options and even a savings rate that was probably 30% throughout this.
2012-2014 : market recovering. Business recovering but profits bought out two partners, increasing my equity from 31% to 50% though I wasn't recording this asset as it was way too illiqud. Savings rate boosted to maybe 40-50%. had son. Renter in old condo throughout. Still cash flow negative.
2015-2018 : first intermittent boosts of income from my business. Wife quits stable job and starts own consulting business but total comp has decreased for her by 20-30% (damn you healthcare insurance). Great market returns. Exited condo but no net worth change event, just liquidation in 2015. First entrance to taxable investing. Bought new home in 2017. Sold old home in 2018. Small networth boost of about 5% because home appreciated slightly faster than expected. Used transaction to borrow back up to 80% to stay in market (first real leverage). Sold business and recorded 15% net worth bump in late 2018. Savings rates probably hovered around 50-60%.
Looking ahead, I just don't see how it'd be possible to do again. Were not selling my wife's business. Our home value is rising but we're not selling for a long time. Our savings rate (as a percent of income after tax) is now around 70%. If we stayed working, we'd be looking at around 6 years to double. I just can't see it occuring in 3-4 yrs.
I also can't see us working at this pace for 5-6 yrs! I'd rather spend more time with our son. So it really, really isn't going to double in 3-4 years. But I said that the last time too.
Sorry for the long post that's pretty focused on our story. I've been thinking about this time to double bit lately. It was amazingly consistent and mind boggling.
Whatever you're doing, Keep it up!
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Unless you;re not working and are invested in fixed assets only and can just use the rule of 72, the answer is not only 'i don't know' but its actually a lot closer to "i really really don't know' than I think most people admit/plan for.
If your net worth is primarily driven by the market, here are two examples.
An 80/20 portfolio in 2000 took about 15 years to double.
An 80/20 portfolio in 2009 took about 4 years to double
If your net worth is primarily driven by your savings, I've seen folks on this site double their income in a couple years and also halve their expenses quickly, so very drastic changes to savings rate are possible. And very high savings rates make investment returns not as important. And I started a business, so profits/losses from that made it even a lot more volatile for me.
Do your best at saving, be consistent with maintaining your investment strategy and you'll get there. I think we all guess at timelines but they are guesses.
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Thanks guys very informative.
Most of our gain is savings / income.
The savings rate has slowly been increasing, now over 75%.
I dont think it will double in 3-4 years either. Probably never tbh as our plan on retirement is not to use a SWR as we dont require to use SWR as there is no need to leave an estate IYSWIM.
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0-100k took 1 year 6 months
100k-200k took 1 year 1 month
200k-400k took 2 years
400k-800k took ??? (on current pace it will be 2 year 9 months)
So pretty close to linear growth for us until just recently, which makes sense because our savings rate has been the primary driver.
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Our net worth July 2016 was about 50% of what it is now.
About 3 years before that it was 50% again.
I... don't think it'll double in 3 years this time :-)
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Thanks guys very informative.
Most of our gain is savings / income.
The savings rate has slowly been increasing, now over 75%.
I dont think it will double in 3-4 years either. Probably never tbh as our plan on retirement is not to use a SWR as we dont require to use SWR as there is no need to leave an estate IYSWIM.
A safe withdrawal rate is about withdrawing a 'safe' amount so that you don't run out of money before you die, not so that you have $$ left over.
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Isn't this something you can just quickly estimate with a spreadsheet?
Net worth + contributions + dividends/distributions + appreciation.
I have a row for every month and just use the calculation from the previous row as the basis for the next row.
This obviously will just be a guess based on what you assume the market returns to be, but you should be reasonably certain of the other variables.
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I think for obvious reasons for most it’ll take a lot longer to double $500k than it will to double $100k.
Personally I hit:
$100k Apr 2016
$200k Jan 2018
$400k Apr 2019
If I work straight through at my current job and the market returns 6% I should hit around $520k by the end of 2019, and about $800k two years from now (doubling where I’m at today)
Also - this is just savings and investments. I don’t own a home and if I did I doubt I’d consider it in my net worth when discussing income needs for retirement.
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Thanks guys very informative.
Most of our gain is savings / income.
The savings rate has slowly been increasing, now over 75%.
I dont think it will double in 3-4 years either. Probably never tbh as our plan on retirement is not to use a SWR as we dont require to use SWR as there is no need to leave an estate IYSWIM.
A safe withdrawal rate is about withdrawing a 'safe' amount so that you don't run out of money before you die, not so that you have $$ left over.
Yeah I understand, we are in the UK though so our later years are looked after by the government via our taxes which we pay via national insurance contributions from age 16-67. Works out to around $12kUSD a year per person after 67th birthday if you have worked 35 years or longer. Thats another topic though.
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Isn't this something you can just quickly estimate with a spreadsheet?
Net worth + contributions + dividends/distributions + appreciation.
I have a row for every month and just use the calculation from the previous row as the basis for the next row.
This obviously will just be a guess based on what you assume the market returns to be, but you should be reasonably certain of the other variables.
Good idea, I will have a go at that. I already have a tab for this but on my personal pension so should be easy to copy n paste!
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Finally got round to doing some exceling (is that now a thing?) and it seems at current track with 4% return it would double again in just under 7 years. Time will tell!
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My wife and I went from 1M on 1-1-12 to 2M on 1-1-18. So 6 years.
Growth plus savings, savings rate was not real high those years as we
had two kids in college.
But, those were an exciting 6 years with yearly net worth increases
of twice our yearly income.
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Isn't this something you can just quickly estimate with a spreadsheet?
Yes, in fact with a single function. See MS Excel: How to use the NPER Function (https://www.techonthenet.com/excel/formulas/nper.php).
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0 to 100K: ~5 years
100k to 200k: ~3 years
200k to 400k: ~3 years
400k to 800k: Not there yet
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When I started my current position in 2009, our net worth was about -150k.
In 2013, we were at zero.
At the end of 2016, we were at 600,
Today, we're at 1.33M
Projecting 2M by 2022 retirement but that may be a bit optimistic, 1.75m is probably closer since I've started putting some money in bonds of late.
I can't believe these numbers. I can't tell you how thankful we are for MMM and Dave Ramsey.