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The Pinnacle Point

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    Cool The Pinnacle Point


    I am a big advocate of Dave Ramsey and his "baby steps". If you haven't read his book, "The Total Money Makeover", I highly recommend it. A Cliff's Notes version of the baby steps:



    The last step "Give" is actually described as "Build Wealth" in the book. And, as part of building wealth, he encourages you to always (1) spend, (2) save, and (3) give. Since I just recently finished step 6, paying off my house, I am now ready to tackle, the last, elusive step 7: BUILD WEALTH. That's what this goal is all about.

    Dave describes the pursuit of Step 7 as reaching the Pinnacle Point. It's like reaching the top of Mount Everest in a financial sense. Basically, the goal is to save so much money that your money makes, on AVERAGE, as much or more than you do at your day job. The way to calculate this is to take your yearly salary and divide it by .08. For example, if you made $80,000 a year, the Pinnacle Point would be $1,000,000. If you make $40,000 a year, the Pinnacle Point would be $500,000. The reason for this is that the stock market, since its inception, has averaged about 12% return. If you invest in good growth mutual funds, you should be able to expect to get, ON AVERAGE, something close to 12%, however, you need to also account for taxes and inflation, so using 8% (2/3 of 12% saving a 1/3 for taxes and inflation) is a good approximation.

    I will highlight some milestones along the way in my pursuit of the Pinnacle Point:

    - Net worth reaches a million dollars
    - Net worth reaches the Pinnacle Point
    - 401k reaches a million dollars
    - 401k reaches the Pinnacle Point
    - Personal investments reach a million dollars
    - Personal investments reach the Pinnacle Point

    The reason I separate 401k from personal investments is because I cannot touch my 401k without penalty until I am 59 and a half years old. I'll turn 39 this year, so I have 21 years before I can realistically spend that money. So, I'd really like to invest in a personal account just like my 401k, but money I can access without penalty whenever I want.

    As a point of reference, I'm starting with a net worth of $600k, 401k @ $400k, and personal investing at $0.



    I will likely not even start personal investing until next year because we have a lot of plans with our money this year like rewarding ourselves for reaching our last financial milestone, buying things we've put off like new tires and a carpet vacuum, and we want to get a fuel efficient used car, too. Fortunately, with absolutely no debt, if we can both keep our day jobs, it shouldn't take too long to do all those things with cash and start the personal investing next year.

    Like my last financial, life goal, I likely won't have constant updates, but I will try to pop in from time to time to at least give progress reports and communicate any particularly good or bad financial developments.
    Last edited by Jason; 02-10-2014 at 01:41 PM.
    - Jason

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