The Fallacy of Goals

July 11, 2006 at 9:01 am 3 comments

While chatting with Quoc (a HS friend that’s also learning about investing), I realized that my goals are nothing but lofty wishes and will remain so unless I have a plan to achieve these goals. For example, my medium term goal is to save $100K in 5 years (2011) but I have no plan on achieving it. I guess I thought by setting a goal, something brilliant and magical would happen and I would achieve this goal. Of course, realistically, when 2011 rolls around, I probably would not have $100K in the bank if I have no plan.

Assuming I just hide the money under a mattress, to save $100k in 5 years, I would need to save $1,667  per month.

5 years * 12 months / year = 60 months

$100,000 / 60 months = $1,667/month

There’s two way to achieve that:

1)      Get another job that would pay $2,000 more per month while maintain current standard of living.

2)      Invest.

Since it’s unlikely that I can find a job that would pay me $2,000 more per month right away, so the best way is to invest. Let’s say I start with $3,000 in a index fund that pays 11% return every year, then with 3% inflation (and not counting tax) to have $100,000 by the end of 5 years, I would need to save $1,200 per month (according to this calculator). This is a teeny bit more reasonable but still tough to meet without an increase in income. Hence, I probably need do a combination of 1 & 2 or do option 3:

            3) Get a part time job or start a business on the side. This way, no time to have fun (aka spend money) while generating more income.



Entry filed under: Personal Investing.

As a Thank You for Renewing Your Contract, You get to Pay More Each Month! Negotiation 101

3 Comments Add your own

  • 1. Dennis  |  July 17, 2006 at 11:36 am

    Unfortunately, if you invest your money the way I did, you might end up with less than if you didn’t invest it. 😦

  • 2. Danny  |  July 24, 2006 at 12:20 am

    4. start your own side business… which is what peter and i are trying to do 😛 i need to get cracking though, haha

  • 3. Alan  |  January 3, 2007 at 6:30 am

    Freedom is nothing else but a chance to be better, taste your freedom and be better.


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