Who Wants To Be a Millionaire?
It's criminal they don't teach this
When you first get a taste of money after college or after getting a promotion, the dopamine hit you get when you buy a new car or go on vacation is felt immediately. Investing, particularly for retirement, is decidedly not.
And remember buying random stocks on Robinhood is gambling, not investing.
So why do we make such a big deal out of it? Because Einstein said so...
The longer you can let your money compound, the easier it is to reach your target retirement account size. What is compounding? It’s when your money makes money. What is your target account size? That depends on the lifestyle you wish to lead, so to make this easier, let’s just say it’s one million dollars.
How much money you would need to save per year to reach this goal? If you’re more than 30 years away from retirement (assuming you retire at age 67), you might be surprised by the results:
Some takeaways:
First: what a difference between 20 and 10 years from retirement age! $17k is like a lightly used Jeep, while $63,000 is a new Lexus - every year! In this case, the difference is exponential. It will be hard to get to the tres commas club, let alone the dos commas club saving so late.
Second: if you’re 27 years old or younger, becoming a millionaire costs you $2,259 per year. That’s like a roundtrip plane ticket to some shitty EDM festival with your weird friend. Don’t watch Zed for the nth time, toss that in your retirement account and invest it A$AP.
Third: thirty years from retirement costs you $6,000 per year or $500 per month. If you have a match from an employer in your 401(k) that alone might get you to this number. And if not you can always start a traditional or Roth IRA which happens to be the max you can save in these per year (nice how that works out).
Fourth: look at your Doordash expenses. Now back at the chart. Look at your bar bill from last weekend. Now the chart. Streaming subscriptions. The Chart! You can become a millionaire making minor improvements today. And no, skipping your latte isn’t stopping you from retirement (but every dollar counts).
“But I haz debt!”
Join the club. Most of us have some form of debt we want to get rid of. We’re confident we convinced you to invest, so should you ignore the debt and pile it into the stock market? That depends on the type of debt we’re dealing with: a mortgage? Car loan? Student loans? These are all up for debate.
But credit card debt?
Here’s why:
Reason #1: you won’t get the same return out of the stock market. As of May 2021, the average annual credit card interest rate is 18% (if you’re just starting to build credit, it’s usually more). This means the credit card companies want $18 for every $100 you spend. “Brutal” doesn’t come close to describing that trade-off.
Can the stock market make more than 18% in a year? Sure can. But stocks lose money one-third of the time. It’s possible the stock market can out-pace your high-interest debt, but it’s not likely. And good luck trying to time it.
Reason #2: the accumulating interest charges. Interest is the amount of money you’re charged to borrow money. When you pay the borrowed amount back, the interest goes straight into the lender’s pocket. This means that if I borrowed $100 from you at 5% interest, I pay you $105, and you get to pocket the $5 for the privilege of lending me the money. Not a bad gig, if you can get it.
Let’s say you have $30,000 of student loan debt. For most of us, that’s not a figure we can just pay out of cash flow; it’s going to take some discipline to pay that amount off. At $215 per month, that’s a repayment timeline of 20 years.
Always pay more than the minimum if you can because compounding can help you. How much extra? Again, a surprisingly low amount can make a huge difference:
Cool, right? Even an extra $100 per month cuts your repayment time and interest costs in half! The best part is that you can set this up to be deducted automatically each month.
What’s the upside?
If you have student loans or credit card debt, find a way to make an extra payment each month. Then, find a way to automate it. You will save yourself money that would otherwise go towards the suits.
Pay off high-interest debt A$AP before investing in the stock market. Let compound interest work for you rather than against you. Avoid revolving credit card balances and try to minimize your interest rate on things like mortgages, student loans, and car loans.
And, if that’s not motivation enough, imagine your lender is this guy:
If you haven’t seen it, put it on your list to watch Guy Ritchie’s Snatch. It’s a thoroughly enjoyable crime-caper film featuring this charming bloke and some no-names named Brad Pitt, Benicio Del Toro, and Jason Statham.
For Your Weekend:
This is where we’ll post a round-up of essays, podcasts, and streaming shows to check out over your weekend. We cast a wide net so you don’t have to.
Read:
Looking for the Message in Nas’s ‘It Was Written’ by Paul Thompson (The Ringer)
Twenty-five years after it was widely panned at the time of its release, the Queensbridge MC’s second album is hailed as a classic. But what did the discourse at the time get right—and what did it miss?
“Rolling Stone gave the album two stars, criticizing Nas for trafficking in rap that prizes “authenticity, not articulation” and calling the lead single a “crossover con job.” However cynically you choose to read the rollout, it worked. While Illmatic hit no. 12 on the Billboard 200 and took nearly two years to be certified gold, It Was Written spent four weeks at no. 1 and was double platinum just a couple of months after its release.”
Listen:
The Rewatchables: ‘Raiders of the Lost Ark’ With Bill Simmons, Chris Ryan, and Sean Fennessey (The Ringer)
It’s a great podcast that makes one very important observation: just as Spielberg’s Jaws created the modern blockbuster, Raiders creates the modern movie template. Something happens every ten minutes, a breakneck pace for 1981 that feels languid now: giant boulder! Snakes in a pit! Nazi monkeys! Submarines! The set pieces come fast and furious (pun intended).
Bill refers to Pauline Kael often, legendary film critic for The New Yorker. Reading her review now, it’s clear she correctly called the direction major films would go in. Listen to the pod, then read her review. Here’s a taste:
“Except for the occasional prestige picture that offers middle-class group therapy… it’s all fantasy. And when the [marketing men] are given what they want—comic-strip pulp or slobby horror—they swing into action heroically.”
Just a reminder: that review is from forty years ago.
Chuckle:
