The Grand Unified Plan

I recently mentioned the grand plan I will be pursing these next few years
in my yearly Oracle post. I
want to provide a overview of that plan in a bit of detail. The main goal of
this plan is to retire AS SOON AS POSSIBLE. This is not because I hate work,
but because I want to have the time to pursue other projects. To provide some
context to that idea, I like to think of my life as split into three

1. Ages 0-23: Education, the time of my life when I was mostly focused on
learning. Learning how to be of value to people who know me, future employers,
and to the world.

2. Ages 23-40: Work, the time of my life when I get my living and finances
in order so I can retire early. The learning has not stopped, but my focus is
more on producing things of value. Either for a company or for people who know

3. Ages 40-Death: Retirement, the time of my life when I can take my
accumulated knowledge and produce something. I hesitate to call this the
“Legacy Building” period, but I do want to use the time for some long spanning
works and projects.

Now how can we achieve that? The short answer is, predictably, lots of
money. Right now I have started a small investment with Betterment, an online investing service. I
give them money and the make more out of it. Investing (either through
Betterment or something more hands on) is the key here. Now, I am going to
start the math talk explaining how this is going to work. If that sort of stuff
bores you skip the summary section.

If you look at some of
Betterment’s returns
you can see they averaged 11% a year. Lets round that
down to 10% to make calculations easier. That means if you had $100 invested in
2013, when 2014 starts you have $110. Now if we scale that out to say half a
million dollars, 10% of that yearly would be $50,000. Plenty of income to live
comfortably. So the goal is have half a million dollars invested as quickly as

Now that we have a number, how long will it take to reach it? First we have
to consider expenses. I have got two big ones in the future: a house and a new
car. The house will probably be around $260,000. This number represents the
remaining mortgage including interest and not the total cost. I arrived at this
be assuming a $100,000 down payment and a loan with a 3.75% interest rate which
I predict paying off in under 15 years. I predict the car will cost around
$15,000. Since
some sources
estimate your car will last on average 10 years, it seems
prudent to budget for at least one. So now we pushed the goal back a bit as it
is $775,000 (rounded to $800,000). This represents the predicted expenses
($275,000) and the necessary investment ($500,000).

Based on my records from last year I spent $9230.94. I do not expect that to
change greatly, but let us round that up to $10,000 a year in personal
expenses. I will also be on the hook for around $4,000 in housing taxes and
$1,500 in
heating costs
. So that puts us at around $16,500 in yearly expenses. Let us
round that up to $20,000 to make life easy and account for unforeseen expenses

Now what about income? If I take my current salary, add in a 6% raise each
year (the average so far), and then calculate my total income after 10 years
that puts me at $995,990 or almost a million. However, this is before taxes and
expenses. If I subtract my average tax burden (26% of income) and $200,000 (my
expenses over 10 years) I get $540,000 to put towards my $800,000 goal. Close,
but not there yet. If we do the same calculation out to 15 years we get
$1,761,362. Now if we subtract taxes and expenses for that period we get almost
exactly a million (total income: $1,761,362 minus taxes at 26%: $457,954.12 –
minus expenses for 15 years: $300,000 = $1,003,407.88). That puts me well in
the range of my goal with plenty of buffer. Now if you look at the above age
range and know I am 25 this year you can see how in 15 years I will be 40 and
just hitting the retirement age and retirement investment I want.

The best part of this is I suspect the numbers will get even better. If you
look at the goal, some of that is just lost/non-interest generating cash (the
house and car or $275,000), but the rest goes into my investment account (some
$500,000). And that amount will grow year to year, so if every other value were
to remain consistent I would get to my goal earlier than predicted since every
one of those dollars contributed to the $500,000 goal will be working for me
earning cash.

Now it is a bit dangerous to assume all these numbers will turn out as
expected. It does seem unlikely to see a 10% growth on investments each year or
that my income will rise each year, despite some anecdotal
. It could very well fall. You will notice I took some cheats here,
like assuming my expenses, taxes, etc stay constant. You should not see this
plan or a prediction, but as a guideline with milestones. I have an objective
and I have a path to get there. I know the numbers I need to hit on that path,
and as I walk it, I can adjust as the path unfolds.


Through low spending and high savings I hope to have enough invested in 15
years to live of the interest and pursue fanciful goals. I cannot predict the
future, but hopefully being thrifty will get me to a retirement earlier than
the US
average of 62