Now that the election has come and gone, I’m sure President Obama and his staff are busy at work trying to put together a plan for the next 4 years. In some ways, it’s hard for me to believe that it’s already been 4 years since he was last elected – as it so often seems, time seems to be moving along at a blistering pace.
The First Term
Here’s what I’ve been able to accomplish in the first 4 years:
- Finished off grad school, M.S. degree
- Promoted from intern to full-time senior engineer
- Went from $5k in savings to ~$180k in net worth
- About $60k dividend portfolio for early retirement
- About $110k portfolio for traditional retirement
- Purchased my first rental property
Not bad. I’ve definitely come a lot further than I could have ever fathomed just 4 years ago. For that, I am most grateful. I realize how hard it has been for many young professionals to get their careers started, so I would say luck definitely played a role in my progress. I was fortunate to be able to land an internship, graduate, and be promoted to a full-time position without any gaps in-between. For that to happen, everything had to fall into place perfectly, and somehow it did. Most companies I know in high-tech implemented some form of hiring freeze in 2009, so I was extremely lucky that my employer at the time made the exception for me.
One thing I do regret, however, is waiting to get started in dividend investing until this year (2012). When the markets collapsed in 2008-2009, a window opened for that perfect “once in a lifetime” opportunity to invest in. I was an intern at the time, still very naive, and shunned away the markets when I saw older co-workers panic. That’s no excuse, though, and I should had known better. I had a gut feeling that I should be investing in the fear, but didn’t have the conviction to pursue my hunch any further.
The Second Term
Fast forward 4 years later to present day. Here are my preliminary goals to achieve by November 2016, when I will be 32:
- Approach the final years of my engineering career
- Start running FireCalc and Safe-Withdrawal Rate simulations/calculations to determine how soon I can check out
- Stop investing in my 401k (should have enough of a foundation to allow for the compounding to take over)
- Stop investing in my Roth IRA (hoping that my salary will be too high, thus making me ineligible)
- About $140k dividend portfolio
- Purchase 2 additional rental properties that generate positive cash-flow
To make the above possible, I will of course need to stay employed at, or above my current salary. If I can save $50,000/year in net income (which is where I am roughly at), this will give me $200,000 to invest.
If I can secure two additional rental properties at ~$70,000 each for the downpayment, this will leave me $60,000 to invest in my dividend portfolio.
Based on the current market value of my dividend portfolio of $60,000, the additional $60,000 investment will allow me to double the portfolio’s value to $120,000. The other $20,00 will have to come from: share price appreciation, dividend re-investments, and any extra contributions made from windfalls – bonuses, stock options, etc.
If we rely strictly on share price appreciation, to take a $60,000 portfolio to $80,000 in 4 years would require an annual growth rate of 7.46%. I’m not counting on relying on share price appreciation alone, but this isn’t an absolutely outrageous growth rate figure either.
Who knows, maybe the president will come up with a plan that will actually help accelerate economic growth 😉
If the dividend portfolio can reach $140,000, at 4% yield, this provides $5600/year in dividend income. This equates to ~$467/month which is about 31% of my current expenses.
If the rental property acquisitions come through, I am going to estimate that each unit contribute a conservative $350/month in profit. This would net an additional $1050/month (from 3 units, including the currently owned rental).
So, that works out to $1516/month in passive income, which covers 100% of my typical expenses in a given month ($1500). Thus, if everything falls into place, I will have *achieved early financial independence!!!
The president has received a lot of flak over the past 4 years for the lack of economic growth in this country. Many Americans have struggled to find work, and many more speak of possibly having to work until the ripe young age of 80.
However, not everyone should have to be confined to this fate. Those of us who have been fortunate enough to be blessed with good-paying, stable jobs, should have the foresight to plan for our futures. Anyone who was working and witnessed the financial meltdown knows first-hand how sudden a company’s philosophy can change. They will go from Hiring Frenzy Mode to Workforce Reduction Initiative in the blink of an eye. So, we must look out for ourselves.
If we rely on ourselves, save heavily, and invest wisely, extraordinary results are possible!
When President Obama first won the presidential election in November 2008, I was just starting off my career, working as an intern. I never would have dreamed in a million years that it would be possible for my working career to start at the same time as his presidency and to end at the closing of his second term.
*allowing almost 0% margin of error 😉
So, where do you see yourself in the next 4 years? What are you goals, dreams, and ambitions?