For this scenario we assume you're earning $5,000 per month from your job and that it is increasing by 3% per year from inflation.
I am going to take some time to go over how I model and calculate this since it is largely the same for subsequent scenarios in How to Acquire a Multi-Million Dollar Investment Portfolio While Earning Just $5,000 Per Month.
So, here's a chart showing the Gross Paycheck you receive each month for the first year.
Here are a few things to note. First, you will notice that I assumed we started this (and all scenarios) on January 1, 2018. That means the first year is actually January 2018 through December 2018.
Second, you will notice that your Paycheck in January 2018 was for $5,000 and February 2018 was for $5,000 as well. I can hear you saying, "James you have an error in the very first chart you shared with me." Again, please put down the pitchforks and let me explain. For the Nomad Calculator 3, I assume that inflation happens in the future. That means that we start adjusting for inflation with any months beyond our current month. I see your pitchforks lowering... that's good. So, I am writing this in February, 2018. That means that we will start adjusting for inflation in March and beyond. Which, it shows correctly. Whew! Narrowly escaped that with my life.
The third thing regarding this chart showing your Paycheck for the first year. Do you think I believe your boss is really going to be giving you "cost of living", inflation raises every month? I've been self-employed for a long time, but even I am not that naive. I could have written the Nomad Calculator to only give you a raise every year to adjust for inflation (sort of like what I do with rents that adjust with each new tenant/lease renewal on the real estate related stuff) but I opted to do it monthly even though I do realize that is not a perfect representation of reality. I hope you're OK with that.
So, I showed the Gross Paycheck you're receiving for the first year. This is what it looks like for the entire 40 year, 480 month, period that I am modeling for you.
So, a couple things about this chart. If you look at your Paycheck 40 years in the future, you are earning $16,230.33 per month gross. Yes... that's right, but before you get too excited realize that a cheeseburger on the dollar menu at McDonDon's will cost you over $3.
Here's a chart showing you what $1 is worth at any point in the future.Read More