I've been wanting to revisit my projection target for some time now but fails to do it everytime I said it to myself. Some readers have also asked regarding how I came up with my projection target so I thought this would be a good time to explain them.
When I set my projection target back then in 2011, I was leading a single life with an aggressive mode of savings plan with very little mandatory expenses to care for. Saving money was very simple back then. If I feel I wanted an extra challenge to save more money for the week, I'll settle for hawker food all week long and stay out of the malls for the weekends. I am an introvert by nature so staying weekends to play either Football Manager or watching drama would make me very satisfied. Those who played the game or has a habit of watching drama would know what I am talking about. They are addictive in nature so time would pass by extremely quickly. On good times, I could save up to around 90% of my pay. On average, they are usually in between 80% to 85%.
Given the situation back then, I made a very stretched projection target for myself to retire (or semi-retire) from the corporate office by 2020, accumulating $1,414,705.83 in the process and yielding passive income enough to pay for my household expenses. This was done by injecting $60,000/year or $5,000/month and yielding a dividend rate of 6% reinvested into the portfolio. I took out all the other assumptions such as bull or bear scenario because it is something I cannot predict anyway.
Projection Target (Original)
| Year | Year | Starting Capital | Cumulative Annual Capital Injection | Dividends on Starting Capital | Total Yearly Dividend Payout | Monthly Passive Income |
| 0 | 1/9/2012 | $100,000.00 | $60,000.00 | $6,000.00 | $6,000.00 | $500.00 |
| 1 | 1/9/2013 | $166,000.00 | $60,000.00 | $9,960.00 | $13,920.00 | $1,160.00 |
| 2 | 1/9/2014 | $245,920.00 | $60,000.00 | $14,755.20 | $19,190.40 | $1,599.20 |
| 3 | 1/9/2015 | $345,030.40 | $60,000.00 | $20,701.82 | $25,453.25 | $2,121.10 |
| 4 | 1/9/2016 | $469,594.05 | $60,000.00 | $28,175.64 | $33,302.84 | $2,775.24 |
| 5 | 1/9/2017 | $627,460.53 | $60,000.00 | $37,647.63 | $43,245.80 | $3,603.82 |
| 6 | 1/9/2018 | $828,572.82 | $60,000.00 | $49,714.37 | $55,909.12 | $4,659.09 |
| 7 | 1/9/2019 | $1,085,594.23 | $60,000.00 | $65,135.65 | $72,090.20 | $6,007.52 |
| 8 | 1/9/2020 | $1,414,705.83 | $60,000.00 | $84,882.35 | $92,807.76 | $7,733.98 |
Dividend yield of 6% per annum was somewhat the baseline target I would like to achieve at the end of the day. Of course, judging by my current portfolio, it is yielding at around 5.14% right now so it's not a major problem I would foresee going into the future.
Capital injection of $60,000/year or $5,000/month is the key to the acceleration and this pose a bigger problem going into the future. I was drawing around gross at $5,000/month back in 2012 (I only received started contributing to CPF in 2013 after my SPR application was approved) so the amount of capital injection projected was based on 100% savings rate to target for. Of course, there is still the allowances, 13th month and performance bonus which I did not include that played a part as well but the idea of injecting the full $5,000/month was stretched. I was pretty sure that this was not going to be sustainable but I keep it as it is until today.
Getting a higher education, married life and a kid change the whole perspective of my financial set up today. I am drawing a higher salary compared to back then but the expenses have gone faster than the increase in income. I have also since started my contribution to the CPF since 2013 so the net salary I am taking home has very much been reduced. I am no longer able to save in the high end of the bracket like I used to in the past. These days, I am usually looking at the 50% rate as a personal target. Anything above that, I would consider the month to be extremely successful.
With that in mind, I will be doing a revised projection target by using a rolling forecast method to incorporate my short term target. Since I am using the rolling forecast methodology, I will be revisiting them regularly to see where I stand at certain situations and make changes to them more regularly. The advantage of doing this is I can incorporate changes whenever there are a bull or bear case scenario that are not within our control.
The changes I would make to this is to the capital injection which I have revised from $60,000/year to $36,000/year ($3,000/month). The current starting capital and dividend yield rate would remain as what I currently have in my portfolio. Even though there might be a chance that I will miss out on my 2020 target or possibly face a bear case scenario in the market, I think it's much more realistic to project a short term target this way.
Short-term Projection Target (Rolling Forecast Method)
| Year | Year | Starting Capital | Cumulative Annual Capital Injection | Dividends on Starting Capital | Total Yearly Dividend Payout | Monthly Passive Income |
| 3 | 1/1/2015 | $280,820.00* | $36,000.00 | $14,434.00 | $16,285.00 | $1,357.00 |
| 4 | 1/1/2016 | $333,105.00 | - | - | - | - |
I'll be updating my About Me page in a while to incorporate these changes and provide a more realistic and sustainable way of tracking them.
What do you think of the idea? How would you plan for your short term target?Interested to know on some of the other methodology other people are using.
