My Decade-Long Journey To Five Million

How Big Of A Goal Is This?

5 Million. 10 Years. A naive way to calculate this would be to divide 5 million with 10 years–so per year I’ve gotta earn around 500 thousand dollars. Which is a joke really, considering my current income level

But it’s actually a bit more complicated than that, just like we can see from Paul Lutus‘s excellent financial calculator here. There are 5 factors that we can play with:

Present Value (PV). This is the money that you have, now. Obviously the greater this number is, the better! If I already have $5 million NOW, then I won’t need to have this 10-year project in the first place.
Future Value (FV). This is the money that you want to have in the future.
Number of Payments (NP). This is the number of payments. Let’s say in 10 years, I manage to put 100k every year. That means I make 10 payments. On the other hand, if I put, say, 10k every month, then I make 120 payments.
Payment Amount (PMT). This is in negative because the money is taken away from us (by the bank, for investment, etc.)
Interest Rate per period, in % (IR). This is the interest rate during that period. Meaning, let’s say I make 12 payments in a year. Then I should put the monthly interest and not the annual interest.

Now the interesting thing is that, with these 5 parameters, if you set 4 of them, you can always calculate the remaining one. So for the purpose of this blog, we know that:

PV = 0. I don’t start with any money.

FV = 5,000,000. The end goal.

NP = 10 years, so assuming months, there are 120 payments, and 120′s what we’re gonna enter.

Interest rate = Since we’re using monthly payment period, we have to use monthly interest as well. Let’s be convervative and put this at 0.5%.

The calculator tells us the Payment amount: I have to put in more than thirty thousand dollars per month to reach this target.

No matter how you look at it, 5 million is a HUGE target for me! To be honest, I’m not sure yet how I can get there. But I’m sure it can be done though!