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10 Year Plan

Yesterday my 10 Year Plan officially started. What is my 10 Year Plan? Well, it has been something that has been brewing in my mind for the past 11 months. I decided that I wanted to become financially independent by the time I turned 35. So, yesterday just happened to be my 25th birthday, hence the start of my 10 Year Plan.

Why 35? I wanted a long-term goal. You may see a trend of my being goal oriented. I have not, however, had a good long-term goal. Goals need to be measurable and realistic. 10 years seems realistic for becoming financially independent. Measurable... well, I have to first determine what financially independent means, to me. It means being able to choose what I am going to do, any given day, on that specific day. If I can wake up in the morning and decide to goof off the entire day, that means financial independence. So, what is it going to cost for me to do this? I cannot predict the future, but, I can make some educated assumptions. I think that I will be living in a different home within the next ten years. I have lived in my current home for about nine months, and I want to live in a different home already. The space is nice, the neighborhood is nice, but it isn't "me" (or my wife, for that matter). We want a decent chunk of land, we want to be creative with all aspects of the home, and we want to start a real estate. This will be much more expensive than my current home (which costs about the average home price for Indiana... $130,000. That is cheap by national standards, but the nation is not New York City or Los Angeles). So, I have decided that we must first cut our expenses and break apart our goals. First, I want to refinance my home at a better interest rate. I have about 15 months before I can do this without paying a penalty. I had pretty poor credit when I closed on my home, and it has improved dramatically since then. I have already received two pre-approvals for new mortgages that are over two points lower. So, I have to do an analysis to see if I should just pay the penalty... as this comes out to nearly a $200/mo. difference. Next, I want to pay off each of my relatively new vehicles, which comes about to about $500/mo., combined. Then, next summer, my auto insurance rate should drop by about $100/mo. since I am becoming a more mature and responsible adult. So, in total, it looks like I can drop my expenses by about $800/mo. within a year, or so.

Beyond that, I need to make more money. So, I have started a company... Reinvent Solutions, LLC. It is an IT services company. At this point, it really just used to better separate the funds I make doing side work. It also gives me a couple of tax advantages (we do not, however, do anything illegal... pigs get fat, hogs get slaughtered). My goal is to make an extra 10% with this venture, and half of this will be saved for my financial independence. If it grows, that is great.

Some real estate investment will most likely be in order, as well. I plan on getting a property, and the sooner, the better. I do not plan on flipping. I do not live in, or near, a market that would warrant flipping. I will be buying and holding. Maybe an investment property per year is a good goal.

Anyhow, here is my basic formula. I need to find out what I need to make per year in order to live the lifestyle I want. Given that I will be reducing my expenses, yet I will be moving to a larger home, I will probably need to make as much money as I do today (given I will sell my current home and have decent equity by then). Further, my wife will be working by then, and she will cover our healthcare coverage, as she will be working in the healthcare industry. So, I can really get by with making the same take home pay as I do now, adjusted for inflation. The easiest way I have seen to do this is to have 10 times the amount you need, and to get a return of 10%. These are easy numbers, and realistic. So, if you make $50,000/year, you need to have $500,000 making a 10% return. This will give you $50,000/year.

This is all very basic, and it will certainly be altered over the next 10 years. As I have learned from military conflicts, the best laid plans do not survive first contact. I am young, and I have a lot of potential left. I am married with three children, and I have not yet graduated from college (hurry up May). My earning potential should increase with that degree. I also plan on pursing a master's degree (probably an MBA), and a law degree (JD). This is all contingent on my wife getting back to school and becoming a nurse. She has always wanted to do this, but she has put it aside to raise the children. She is starting back to school next semester with one course at a time, until Fall 2007, when she will start clinicals.

Expect more updates about my 10 Year Plan, as time permits, and news occurs. Maybe you will have your own 10 Year Plan....

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Blogger JM Says:

November 28, 2005 7:27 PM 

How do you plan to get a consistent 10%, adjusted for inflation?

Blogger Dus10 D Says:

November 29, 2005 9:03 AM 

I am not really worried about that, at the time. I feel confident that it is achievable, based on consistent, long-term, returns from the stock market. Further, having rental properties that consistently have tenants can yield great returns. They can easily range from 12-20%, based one various conditions. I will also have some very conservative investments that will be much lower than 10%. In the end, I will probably adjust a considerable amount of my 10 Year Plan. I am really working on what I am going to do for the next year, just to get started. Then, I will re-evaluate every year for the next five years. After that, I will probably re-evaluate for often.

In the end, I will probably shoot for much more than replacing my current, existing income, adjusted for inflation. If I had $3 million today, I would be satisfied with a 3-5% return. That would need to be a much larger amount, however, ten years from now.

I would also, like to make more money to do more humanitarian efforts. I would like to sponsor a couple Habitat for Humanity homes, as well as, do some education related things, such as scholarships.

Anonymous Anonymous Says:

November 30, 2010 6:51 AM 

How are you doing on your 10 year plan? This is your 5 year anniversary. I would like to see an update.

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