You will build a year-by-year spreadsheet that shows when your portfolio reaches your two-part number.
An online calculator gave you a date once, and you probably forgot it within a week, because you could not see how it was made or change the parts you doubted. The model you build in this project is different. Every number in it is one you chose and can defend, and when something in your life changes, you change one cell and watch the date move.
This is the centre of the course. It takes your two-part number from lesson 3.4 as the target and your own figures as the inputs. Later modules feed it healthcare costs and use it for coast and barista FI. Allow about an hour.
Build a year-by-year spreadsheet that starts from your current invested balance and age, adds your yearly savings, applies an assumed real return, and shows the year your balance first reaches your two-part number. Then run it at three return assumptions and two savings rates, and record the six results.
Keep it plain. One tab, one row per year, a block of inputs at the top. A model you understand completely is worth more than a clever one you do not.
At the top, set out these cells and label each one: current age, current invested balance, yearly take-home income, savings rate, assumed real return and target. The target is your two-part number from lesson 3.4, Build your two-part number.
The balance should be money you could actually draw on during the bridge years, as lesson 4.2 described: investments in your own name and long-term savings, but not CPF and not your emergency fund.
Your yearly contribution is income times savings rate. Put that in its own cell as a formula, so changing either input updates it.
Below the inputs, make five columns: age, starting balance, contribution, return, and ending balance.
In the first row, the age is your current age and the starting balance points to the input cell. The contribution points to your contribution cell. The return is the starting balance times the assumed return. The ending balance is the starting balance plus the return plus the contribution. This treats each year's savings as arriving at the end of the year, a simple and slightly cautious choice.
In the second row, the starting balance is the previous row's ending balance, and the age is one more. Copy the row down for forty years or so. Make sure every formula points to the input cells rather than containing typed numbers, or your tests in step 4 will not work.
Add one more column that shows whether the ending balance has reached the target. A simple yes or no formula is enough. The first yes is your year. Some people also use conditional formatting so the row turns a colour, which makes the answer easy to spot when you change inputs.
Change one input at a time, as lesson 4.1 suggested, and record the year each time. Choose three return assumptions after inflation: a low one you would be disappointed by, a middle one you think is reasonable, and a high one that would be a good outcome. Then choose two savings rates: your current one, and one you could realistically reach, for example by saving your next pay rise as lesson 4.3 described.
That gives six runs. Write the results in a small table, savings rates down the side and returns across the top.
Priya, 34, uses made-up figures throughout: invested balance S$200,000, take-home income S$96,000, savings rate 52.5%, so a contribution of S$50,400 a year. Her target is her two-part number from lesson 3.4, about S$1,437,000, which assumed she stops at 50.
Her first rows, at a 4% real return, look like this. At 34 she starts with S$200,000, earns S$8,000 and adds S$50,400, ending at S$258,400. At 35 she earns about S$10,336 and adds S$50,400, ending at about S$319,136. The balance passes her target in the row for age 49, so she reaches it at 50.
Her six results, by the age at which she reaches the target:
Savings rate 52.5%: age 53 at a 2% return, 50 at 4% and 48 at 6% Savings rate about 55.3%, from saving a S$6,000 raise: age 52 at 2%, 49 at 4% and 47 at 6%
Two things are worth noticing. Across the realistic spread of returns, her date moves by five years. Saving one raise moves it by about one year at every return, which is something she controls.
The second is a loop. Her target assumed she stops at 50. At the low return, the model says 53, which means a shorter bridge and so a smaller target. When she rebuilds the two-part number for a stop at 53, she reaches the new target at 52. The model and the number feed each other, and it is worth running them together once or twice until they agree.
A finished model has a labelled input block, rows that run forty years ahead, a clear marker in the year the target is reached, and a six-cell table of results. Every result comes from changing one input, not from editing a formula. Beside the table, write one sentence on which input moved your date most.
Save a copy with today's date before you start the activity below. When you change the inputs at your yearly review, you will want to see what last year's version said.
Build the model, run it at three return assumptions and two savings rates, and write the six resulting years in a small table.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).