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Don't Make the $1 Million Mistake

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Ignite presentation at April 2018 Rutgers University program RU Financially Fit?

Published in: Economy & Finance
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Don't Make the $1 Million Mistake

  1. 1. Don’t Make the $1 Million Mistake- Like I Did! Dr. Barbara O’Neill, CFP® Rutgers Cooperative Extension Specialist Rutgers SEBS Personal Finance Course Instructor
  2. 2. You Can Be a Millionaire!
  3. 3. It Will Just Take Some Time • Right Now: Negative Net Worth Debts > Assets • Later: Positive Net Worth Assets > Debts
  4. 4. Legal Ways to Get Wealthy • Inherit wealth • Marry into wealth • Receive settlements • Possess special talents and skills • Develop a needed product or service • Time + Compound Interest over decades
  5. 5. Two Key $$$ Resources Of College Students •Human Capital •Time
  6. 6. What is the $1 Million Mistake?
  7. 7. Let’s Back Up: Compound Interest
  8. 8. Compound Interest and The Millionaire Game
  9. 9. Compound Interest Illustration Source: National Endowment for Financial Education (NEFE)
  10. 10. Let’s Back Up: The Rule of 72
  11. 11. The Rule of 72 in a Picture
  12. 12. Remember These Numbers 9 years of time 8% average annual return on retirement savings
  13. 13. Doubling Period Scenarios: 8% Interest Early Savings • Age 22 • Age 31 • Age 40 • Age 49 • Age 58 • Age 67 Five Doubling Periods Late Savings • Age 31 • Age 40 • Age 49 • Age 58 • Age 67 Four Doubling Periods
  14. 14. Let’s Back Up: Financial Goal-Setting • Sequential: Goal A, then Goal B, then Goal C • Concurrent: Goals A and B and C
  15. 15. How Can Someone Lose $1 Million?
  16. 16. Here’s My Story: I Practiced Sequential Goal-Setting Started work at Rutgers at age 25 Did not start retirement savings plan deposits until age 34 Difference: 9 years
  17. 17. I Saved for Other Things Great sports car First house
  18. 18. Retirement Always Seemed So Far Away 1978 2020 I’ll get to that “as soon as…” I was even studying to be a CFP®
  19. 19. Fast Forward ≈ 30 Years • I reached the $1 million savings mark but… • I could have had $2 million • 9 years of delayed savings resulted in one less compound interest doubling period • 9 years of delayed savings cost me $1 million
  20. 20. Don’t Make the $1 Million Mistake! • Compound interest is not retroactive! • Start saving for retirement as soon as you land your first job after graduation • Your “future self” will thank you

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