09 June 2006

Net Worth predictions

If I could predict the future, I wouldn't need to save and invest much money. I could make a fortune speculating instead.

But, I can make an educated guess. I now have about 18 months of Net Worth data. By holding our house value constant at it's June 2005 level (I think the $650,000 value is pretty accurate. That's $40K less than the Zillow estimate, but I suspect there will be at least a slight dip), I have 12 months of data that show only the effect of our tangible assets, and decreasing debt.

In that time, our Net Worth has consistently trended upwards each month. The monthly increase has been as little as 0.47%, and as much as 3.27% (great month for stocks). The average monthly increase is 1.25%, giving an APY of 16.08%. A lot of that "yield" is due to savings and debt paydown, not just to investment returns.

So, while past performance is no guarantee of future results, that's a real number. Complex things like tax rates, stock market performance, savings, and income all come into play, but the net trend is all that matters.

Using the 1.25% monthly increase, and holding the value of the house constant, we'll be worth more than $500K in February 2008, and more than $1.0M in September of 2012. Not bad, I s'pose. Using the 90 day weighted average of our Net Worth increases, 2.01%, makes us millionaires by May of 2010. That's an APY of 27%, tough to maintain, but it makes for an ambitious goal.


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