2. Why Save? The reward for saving is INTEREST! Save $4000 a year between age 16 and 20, with a 10% annual return, and have $1,000,000 by age 65. With a Roth IRA, it is tax free.
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6. “It’s not your salary that makes you rich; it’s your spending habits” - Charles A. Jaffe
18. 1$ @ 12% 72/12 = 6 years to double An example: $1 @ 12% Now $1 After 24 years $16 After 6 years $2 After 30 years $32 After 12 years $4 After 36 years $64 After 18 years $8 After 42 years $128 After 48 years $256
19. So, $4000 saved at 17 makes one a millionaire at age 65! $4000 X 256 = $1,024,000
20. Jack saves $5,000 at age 38 years old, and earns 8% interest. Approximately how much will he have when he is 65 years old? Jill saves $5,000 at age 20 years old, and earns 8% interest. Approximately how much will she have when he is 65 years old? Jack $40,000 Jill $160,000
21. So, $4000 saved at 17 makes one a millionaire at age 65! $4000 X 256 = $1,024,000
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25. “Drive-thru banks were established so most of the cars today could see their real owners.” - E. Joseph Grossman
26. There is a crucially important difference about playing the game of investing compared to virtually any other activity. Most of us have no chance of being as good as the average in any pursuit where others practice and hone skills for many, many hours. But we can be as good as the average investor in the stock market with no practice at all” - Jeremy Siegel, Professor of Finance and author of “Stocks for the Long Run”
28. If you decide to save for retirement and put your money in an IRA, the government will give you a tax break What, the government is going to do you a favor? There must be a catch!
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30. Investing into an IRA Richard Miller and Jim Jones each make $50,000 a year. Redelsheimer’sPowerPoints Inc. The Millers The Joneses
31. Investing into an IRA Both families are taxed in the 25% bracket. The Millers put $5,000 into their 401 K Redelsheimer’s PowerPoints Inc. The Millers The Joneses $ 50,000 $ 50,000 $ 5,000 401 K - $12,500 Taxes $ 45,000 Taxable Income $ 37,500 Disposable Income - $ 11,250 Taxes $ 33,750 Disposable Income
32. Now the Joneses want to keep up with the Millers, and invest $5,000, but they do so not in an IRA but a regular taxable saving account The Millers The Joneses $ 50,000 $ 50,000 $ 5,000 401 K - $12,500 Taxes $ 45,000 Taxable Income $ 37,500 Disposable Income - $ 11,250 Taxes $ 5,000 Regular Savings $ 33,750 Disposable Income $ 32,500 Disposable Income
33. Which family comes out ahead? Redelsheimer’s PowerPoints Inc. The Millers The Joneses $ 50,000 $ 50,000 $ 5,000 IRA - $12,500 Taxes $ 45,000 Taxable Income $ 37,500 Disposable Income - $ 11,250 Taxes $ 5,000 Regular Savings $ 33,750 Disposable Income $ 32,500 Disposable Income
34. The Millers Net Worth is $ 38,750 The Jones’s Net Worth is $ 37,500
37. Why would the Government be so kind and give a tax break to investors?
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39. Take out money tax free for education and your first house
40. Can take out your principal at any time without a penalty
41. Can put in a maximum of $5000 (in 2010) a year.
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43. Why Diversify? Assume you have 100,000 to invest in your 401K You put all you money in one investment. There is a 50% chance it will quadruple, and a 50% chance you will lose your money. 50% chance $100,000 = $400,000 50% chance $100,000 = $0
44. Why Diversify? Now you diversify your $100,000 into 10 different investments The Odds are the same for each $10,000 50% chance of quadrupling, 50% chance of losing your money. Now assume ½ of your 10 investments quadruple: ($10,000 X 4 = $40,000), and ½ of your investments lose all of their ($10,000 X 0 = $0) $40,000 X 5 = $200,000 You have turned $100,000 into $200,000 by diversifying your money!!
