I remember reading an article where Dave Ramsey said the top two ways that most people become millionaires in the $1M to $5M dollar range; 1) a paid off home and 2) maxing out retirement accounts.
I already knew that paying off a home is always a way to help yourself become financially secure. But how many folks are really maxing out retirement accounts? Not as many as you would think. I did some research and found that although many people polled say they want to be a millionaire one day, not many actually reach it to that goalpost. Employee Benefit Research Institute (EBRI for short) data estimates that just 3.2% of Americans have $1 million or more in their retirement accounts. The numbers below were posted by the Motley Fool from EBRI’s retirement savings data.
These are the amounts in Americans’ retirement accounts:
$0 to $9,999: 58.4% of Americans $10,000 to $99,999: 20.5% $100,000 to $499,999: 13.9% $500,000 to $999,999: 4% $1 million to $4.99 million: 3.1% $5 million or more: 0.1%
You will notice that almost 80% of Americans have less than $100,000.
You may have also noticed on my post Her First $400K that I showed you a tweet from rapper Drake saying the first $100K is the hardest.
No sh*t!!!
That means only the top 20% have made it past the first hurdle of $100k.
The next 14% have reached just shy of half a million dollars.
Not too shabby.
Then the percentage just sink like an anchor.
Only 4% get beyond $500K. And just a mere 3.1% got to the holy grail of $1 million in retirement savings.
And don’t even look at the numbers for $5M, that is a paltry one percent.
Not too surprising that the 1% take the top prize.
Only the top 3% make it to the millionaire promise land.
No wonder so many folks are playing the lottery.
It can take 20-30 years of investing to make it to $1M and the possibly another 7 or so to get to $2M. That’s 40 years! A lifetime.
However, do not be discouraged.
Any obstacle can be overcome with a well-thought out plan.
Making your primary target to get to $100,000 can reap you rewards for a lifetime. Starting here can help you achieve the next goal. Whatever you do decide to do make sure you make your plan as specific as possible.
Write it down.
And no matter what, don’t stop until you reach your goal.
Not Confessions of a Teenage DRAMA QUEEN. Even though I was a teenager, but of a TEENAGE WAITRESS!
Being a waitress was a humbling experience.
After reading about Financial Samurai working for $3.50 an hour at McDonald’s, I was inspired to share my story of making $2.39 an hour + tips while waiting tables at Shoney’s.
It was early experiences like that that shaped my attitudes
toward money and work today.
It is also a reason why I try to tip well.
I believe in being a good tipper because that is how people make their living. My father always says tip well enough for people to feel it. I concur.
A waitress is a pretty grueling job.
You are on your feet for hours on end. You must constantly be moving and taking orders or picking up food. Then there’s the nonstop cleaning, folding of napkins, packaging silverware, putting ketchup, salt and pepper and other condiments out and etc.
That early job experience was enough to make me want to work and study so hard while I was young, so that I would not have to when I was older.
This job and other hardships are what drove me to dig my way out of debt and start saving over 40% of my after-tax income.
I have always been thrifty and a saver.
It is because of that, I knew I could not marry someone that is fiscally irresponsible and stay married to them. It just wouldn’t work.
I have never had the urge to go rent a Mercedes-Benz, drive
down to Vegas, buy lottery tickets at every 7-eleven along the way, buy a $4,000
Cartier wrist watch just cause you know bosses gotta be on time, visit a
psychic who says my lucky numbers are 4,5, and 6, and then bet it all on black.
Nope. I have not given any of that any thought at all.
Except maybe that the color of the S-Class Mercedes with a 3-layer fabric top is impeccably crafted for coupelike comfort, sleekness and outward views when it’s up, or vanishes in under 20 seconds, even as you accelerate to 30 mph should be silver.
After reading the book Nickel and Dimed, I felt that the author expressed my views on how she and I observed the treatment of low-wage workers was pretty spot on!
The job: take orders, greet customers, keep the restaurant
clean, and serve food.
Sounds simple right. Wrong.
We had a busy body manager. Chaotic shifts. And lulls in
customers.
Shoney’s was an eat-in restaurant (mostly was a buffet place) that started in Tennessee, but had restaurants in the Mid-Atlantic region.
So many people opted for the breakfast mostly leaving
afternoons and dinner times pretty sparse inside.
That means little to no tips!
Not something I was told upon being hired.
Some of the food on the menu looked better than it actually
was in-person, but all the food was at least good.
And no matter how hard I worked, it never felt good enough
to our nitpicking manager who was always so concerned about how she looked in
the eyes of the suits at corporate.
She was too busy kissing their a$$ to worry about us lower
employees on the totem poll.
Little good it did her.
She was a ball of constant worry and stress, a chain smoker, and overweight. This was our manager. Our fearless leader?
Is this what management is supposed to look like in America or was this just her issue?
There has to be better ways for her to almost be eligible
for food stamps and make a buck, but what do I know.
My lunch break was the only thing I looked forward to
because it was the one-time no one could give you any orders and you could get
off your feet and rest.
I usually ate a Philly cheesesteak because it was just so good. Calories be damned!
Even some of the cooks seemed disgruntled. They liked to flirt with waitresses and I think one was dating one of them! Whatever.
I just needed the cooks to be happy so that I could get food
out piping hot and fast so I could make this money.
I need those tips!
After calculating the $2.39 an hour, working 40 hours a week
would only get me $95.60! And that’s gross not net!
Anyway, I now had to deal with the situation.
The goal was to have spending money to hang out with my friends and buy all the cool stuff I always wanted but could never afford.
To be so young and naïve. If I would have been thinking, I should have started tucking money into a Roth IRA. I would probably have had less anxiety when I got my first REAL job!
If I would have saved just $2,000 a year from ages 16-26, without adding another penny, in 40 years that money could have turned into $1,586,894.95 at a 10% return with compound interest! That would have required me to only stash away $22,000!
Just some food for thought right there. Start investing young!
WELCOME TO THE WONDERFUL WORLD OF TIPPING
Like the first episode of Buffy the Vampire Slayer, “Welcome to the Hellmouth,” I was welcomed to how cheap people really are.
Tipping is the holy grail of waitressing and bartending.
One of the smallest tips I ever got was from 2 girls I went to high school with. We were not friends but I didn’t expect to only get a $1.17 tip! That was basically the change from the meal they just ate and paid for. Maybe they should have put in an application to work here too!
I remember one time in college when I got a ride home from a
weekend class I was taking (I was doing 6 classes that semester), telling me
she worked at her brother’s restaurant and she made sure to be on point in
order to get that $20 tip!
My days at Shoney’s was long gone by then, but I remember
thinking it is far better to work at a higher end restaurant like her because
you can make more money.
Lesson Learned: Focus working or catering to high-end clientele that can afford to pay for your services.
SAVE LIKE YOU WILL LIVE FOREVER
Have you ever heard the saying “Live like tomorrow is your
last day on earth?”
Well, I like to save like I am going to live forever.
I learned this lesson, like James Brown said, you have to Pay the Cost to be the Boss.
That song and The Payback made me want to get my act together.
I put a plan into action. I was going to save money out of
every paycheck.
It took years to make happen, but I went from saving nothing to putting aside 9% of my income. Then from saving $1 a day to $13,000 a year!
The plan had been to stop living paycheck-to-paycheck.
That was okay, but I needed a goal. Something to aim at.
So I picked a number. $13,333 was that number.
I chose it for a few reasons: 1) The number 3 is my favorite number; 2) I saw that another blogger was saving that amount per month so I aimed to duplicate that, but started smaller; and 3) I did the math and discovered I could have over $100,000 cash if I did this for about 7.5 years.
I also knew it was possible that if I invested $100k in the
stock market that after 30 years without adding another dime, I could have $1
million shored up for retirement.
Considering that about 20% of Americans have $0 saved for
retirement, I knew that I better prepare because tomorrow does come.
The future is going to happen.
If I was going to bet on anything, I would bet on that.
Forget Vegas. You can bet the farm the future is coming. And it’s coming fast!
Remember that 9% I mentioned earlier. Well that small sum turned
into a small nest egg of $25,000!
And most of that sum is invested in just a few stocks!
The power of compound interest baby!
Pro Blogger IRA # 1 of 3 (Personal Finance) Traffic Estimate: 50,000 pageviews Pinterest Estimate: 48,000 monthly viewers
Stock
Price
Stock Quantity
Current Balance
AAPL
$201.35
37.256
$7,501.50
AMZN
$1866.86
5.000
$9,334.30
Total
$16,835.80
Source: GreenbacksMagnet.com
I hope this post inspires people to understand the value of a dollar and that paying off debt and saving are far better than blowing all your money on things.
I get it. You win the jackpot and your financial freedom. You’re on cloud nine.
However, you have to plan your escape from the rate race whether or not you win the lottery.
If you want to get rich, either by picking winning numbers or otherwise, you better learn quick how to manage a fortune.
Here’s why.
CHANCES OF WINNING
Are pretty slim.
According to Fortune magazine, the odds of winning the lottery are about one in 300 million. Considering that there are over 326 million Americans, that makes your odds quite small.
Chances of winning the lottery today: 1 in ~300 Million
Chances of being born as yourself: 1 in ~400 TRILLION
If you want to close this gap, you will have to increase your scope of numbers to play and play more often.
It’s not enough to do the kids birthdays or your anniversary. Going to have to get creative. You need the locker combination to your high school locker, your kids Xbox password, your great-aunt’s wedding date, and your first love’s old address. You know, something like that.
But all jokes aside, you will have to increase your range of numbers to increase your odds of winning.
In addition, you will have to play more often.
It has been well-documented that people who win the lottery once are likely to win it again.
The problem with this is that you also increase the amount of money you lose while playing the game.
LOTTERY WINNERS GO BROKE
Get rich or die tryin’. – 50 cent
Did you know a high percentage of lottery winners end up broke? According to the National Endowment for Financial Education, 70 percent of lottery winners go broke.
According to @NYTimes, 90% of lottery winners go broke within 5 years of winning. What would be your plan to keep your winnings long term?
“Using money you haven’t earned to buy things you don’t need to impress people you don’t like” – Robert Quillen
I have seen too many lottery winners go bankrupt. You win all that money just to go back to being broke! No, thanks.
Forget your friends and family telling you to spend. Do not inflate your lifestyle and then upgrade it even more after moving to that gated community in Beverly Hills. You do not need to outspend your neighbors.
You can still drive a Honda. The kids can still get jobs. If you think that it is taking away an opportunity for someone else to work for a needed paycheck, then let junior volunteer.
That was the advice Fran gave Mr. Sheffield in The Nanny. He wanted to teach his daughter about responsibility and the value of money. So, in S02E21 Maggie became a candy striper at a hospital. Great advice.
Fun Fact: In the S02E08 of Gilmore Girls, Rory gets in trouble at school. It just so happens that one of her schoolmates in that episode was none other than Mr. Sheffield’s youngest, Grace, played by actress Madeline Zima. You can see her in the blue sweater walking behind Rory in this clip.
My advice to anyone who comes into large sums of money whether by inheritance, large windfall, bonus, or lottery is to stay humble.
Hire an intermediary to answer requests for money on your behalf
Set a daily, monthly, annual spending limit
Hire an attorney
Take the lump sum
Create your own annuity with a spending budget
Hire a CPA
Learn how to manage money
Understand your tax liability
BUY STOCKS INSTEAD OF LOTTERY TICKETS
I would much prefer people spend their money wisely than to bet it on chance.
You could invest your money instead of throwing it down on the roulette table. If you are want to be a part owner of Caesar’s Palace, instead of merely placing bets at one, you can buy REIT’s or mutual funds.
Even better, you can buy index funds that includes hundreds of stocks that track a benchmark such as the S&P 500.
Every dollar you invest can possibly be turned into two or three dollars.
Source: familyfinancefavs.com
Not sure what all this is? No problem. Go down to your local library and ask for books on personal finance. You can also look up any words you are unfamiliar with online.
In addition, you can read blogs, listen to podcasts, join investing clubs, get a job in banking, take a few online finance courses, or ask friends and family for book recommendations.
Many books offer book recommendations in the appendix.
All you have to do is be willing to do some homework.
Trust me, it’s worth it.
When your one-day sitting on a beach in Hawaii, sipping cocktails and able to get up at noon just because.
