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Somewhat unrelated to the article, but trying to work out the math of whether becoming millionaires by the time you're in your 30s is hard or not for a pair of

by rawnlq 11y ago

Somewhat unrelated to the article, but trying to work out the math of whether becoming millionaires by the time you're in your 30s is hard or not for a pair of engineering couples in silicon valley. Assuming graduated when they are both 22 yrs old and worked till 30 years old on a typical software engineer salary (pulled this out of my ass, but let's say 125k) they would have had a total gross income of 2 million. If they save aggressively and invested wisely, this shouldn't be too hard to do?

basseq 11y ago
This is easy payment math. Assuming you start with nothing, your goal is $1M in the bank in 8 years, and you make average stock market returns (7%), you need to invest $7,800 per month ($93k/yr). That's approximately 1/3 of your $250k total pre-tax income. The capital is there: the question is whether you can live the lifestyle you want in Silicon Valley on $90k/yr. (Assuming Uncle Sam takes ~35% in taxes and you incur no debt otherwise.) In Excel: =PMT(0.07/12,L18*12,0,-1000000)
- rawnlq 11y ago
  Thanks for actually doing the math! =) There might be a mistake with the $90k/yr leftover though. If you lose 35% of $250k/yr to tax (87.5k) and need to save $93k each year, then you should only have about $70k/yr left. This is 5.8k a month to support two people which is barely doable for me personally (according to my past spending trends on mint.com).
  - basseq 11y ago
    I'll blame rounding. :) It's not easy, but it's doable. There are other ways to reach a million in 8 years, but this is a pretty sure-fire one.
    - rawnlq 11y ago
      Care to elaborate? =P
      - basseq 11y ago
        This is going to sound obvious and/or snarky, but: - Explore other investment types and vehicles (e.g., optimize for cash flow, real estate, increased risk) to accelerate asset growth. - Make more money somewhere else (including taking advantage of simple stuff like 401(k) matching). - Assume you're going to make more money later (and save more money later) / get a better job. - Hope for a huge exit / win the lottery / rich uncle inheritance.

by rawnlq 11y ago

basseq 11y ago

This is easy payment math. Assuming you start with nothing, your goal is $1M in the bank in 8 years, and you make average stock market returns (7%), you need to invest $7,800 per month ($93k/yr). That's approximately 1/3 of your $250k total pre-tax income. The capital is there: the question is whether you can live the lifestyle you want in Silicon Valley on $90k/yr. (Assuming Uncle Sam takes ~35% in taxes and you incur no debt otherwise.) In Excel: =PMT(0.07/12,L18*12,0,-1000000)

rawnlq 11y ago
Thanks for actually doing the math! =) There might be a mistake with the $90k/yr leftover though. If you lose 35% of $250k/yr to tax (87.5k) and need to save $93k each year, then you should only have about $70k/yr left. This is 5.8k a month to support two people which is barely doable for me personally (according to my past spending trends on mint.com).
- basseq 11y ago
  I'll blame rounding. :) It's not easy, but it's doable. There are other ways to reach a million in 8 years, but this is a pretty sure-fire one.
  - rawnlq 11y ago
    Care to elaborate? =P
    - basseq 11y ago
      This is going to sound obvious and/or snarky, but: - Explore other investment types and vehicles (e.g., optimize for cash flow, real estate, increased risk) to accelerate asset growth. - Make more money somewhere else (including taking advantage of simple stuff like 401(k) matching). - Assume you're going to make more money later (and save more money later) / get a better job. - Hope for a huge exit / win the lottery / rich uncle inheritance.