dex
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Oct 28, 2003
- Messages
- 5,105
I just completed computed my 2008 net worth (excluding home value) versus 2007:
- Decrease of 16.1%
I'm estimating it will take about 7 years to break out even (after selling costs) on what I paid for my house in 2006
I'm estimating it will take 4 years to get back to my net worth as of 12/31/07.
That takes a little explaining on the computation for that. Basically the computation is:
1. 2008 net worth less living expenses versus grown by the estimated growth rates (varies) per year
Versus
2. the 2007 new worth less living expenses grown at 3% per year
++++++
I think one of the lessons from 2008 is that, when modeling financial projections it is better to error on the low side for growth rates. When I hear radio commentators talking about 8% annual growth rates I cringe (Dave Ramsey actually said 12% for stock mutual funds).
I think a simple formula for decades of estimating is - portfolio grown at 4% - less expense budget grown at 4% (not 4% withdrawal rate)
++++++
I compute future growth rates two way to see how they compare.
1. 4% growth as above
2. 2009 - dollar weighted average of interest/dividends plus estimated portfolio growth rates. Future years is that number less 1% until it reaches 4%
It looks something like this.
2009 - MM funds growth 2.29%; Funds interest/dividends 3.75%, Funds Growth rates 10% equals 9.67% weighted average growth rates - Future years are reduced by 1% each year until it reaches 4%
The two methods are fairly close after 35 years.
++++++++++++
Living Expenses here
http://www.early-retirement.org/for...pending-and-2009-budgeted-spending-41228.html
- Decrease of 16.1%
I'm estimating it will take about 7 years to break out even (after selling costs) on what I paid for my house in 2006
I'm estimating it will take 4 years to get back to my net worth as of 12/31/07.
That takes a little explaining on the computation for that. Basically the computation is:
1. 2008 net worth less living expenses versus grown by the estimated growth rates (varies) per year
Versus
2. the 2007 new worth less living expenses grown at 3% per year
++++++
I think one of the lessons from 2008 is that, when modeling financial projections it is better to error on the low side for growth rates. When I hear radio commentators talking about 8% annual growth rates I cringe (Dave Ramsey actually said 12% for stock mutual funds).
I think a simple formula for decades of estimating is - portfolio grown at 4% - less expense budget grown at 4% (not 4% withdrawal rate)
++++++
I compute future growth rates two way to see how they compare.
1. 4% growth as above
2. 2009 - dollar weighted average of interest/dividends plus estimated portfolio growth rates. Future years is that number less 1% until it reaches 4%
It looks something like this.
2009 - MM funds growth 2.29%; Funds interest/dividends 3.75%, Funds Growth rates 10% equals 9.67% weighted average growth rates - Future years are reduced by 1% each year until it reaches 4%
The two methods are fairly close after 35 years.
++++++++++++
Living Expenses here
http://www.early-retirement.org/for...pending-and-2009-budgeted-spending-41228.html