$77,000+ is the Magic Number for Million Dollar Millennials. How?

Written by Lawrence Gonzalez

After spending about 5 years trying to help people, either through resume building, financial literacy tips, articles, personal 1-on-1s; I realized that most people won't get it. The math might be confusing. The concepts are --> too broad or maybe too complicated and specific. When you start throwing terms like 401k, compounding interest, Individual Retirement Accounts, Social Security and etc; for the uninitiated, just speak latin and move on.

So F' it...

Here is a magic number and the simplest way to get to the end. Even if you do these steps and messed up everything else; at the very least, the outcome will still be favorable. Favorable (nerd word/link Paycheck and Balances Podcast) = Good AF.

As always, if it's highlighted, it's great content.

1. The Salary, You Need to Have: Earn $77,000

I don't care if you are a Potato peeler, that's the number. You get to this number by 25-30 yrs old and we are in business. I don't care how you split it with a spouse. Half and Half is fine. $50k and $27k with one watching the kids part-time, that's fine too. I'm not talking about any upgrades (job promotions). You can blop down and stay at the same job, do that for 25 years.

2. The Things You Need to Do: Save $28.5k

Please don't fail at this. It's a set and forget it. This is like making eggs... The only thing you need to do (accomplished in 1-2 days). If you can't do this. God help us all. Simple Steps (don't try to fight it):

• Max out your 401k, IRA, HSA.
• Total without you doing the math is a savings of $28.5k annually. 401k for singles at $19k, IRA for singles at $6k, and HSA for singles at $3.5k. You will never reach the max.
• WARNING: Saving less than 20% is simply not going to cut it any more. The Experts are lying to you; if you ask them, you will realize they save way more than 10%. It's a TRAP!!!!

3. The End: Retire with More Than $1.5M

• Your total at the end of the game: $1.65 million.
• As long as significant issues don't arise or you don't start doing coke; you will be fine. I'd also say be moderate in your spending on homes. Don't buy big homes. You will still be able to have a great time. Travel and etc...
• 25-30 yrs old = 50-55 years old <--- way before forced retirement age of 67.

How? and Why? If you Made it this Far and You Have Questions.

• Starting with the number $77,000 (Salary). Mint.com has a comparison tab where you can find the *average spending for a family back for 2018.
• Minus the number $48,194.31 (Annual Avg. Expenses); I rounded it to $48.5k cuz I'm the homie. I'm giving you Day Party money and maybe Starbucks. Check out the table below. Don't mind the last column and the red highlights that's my spending with two homes though.

• Why max out on 401k, IRA, and HSA? If you don't want to read my full break down with the net/max plan just know that they are the trinity of normal people's finances. People that are really in the middle class have at least 2 out of 3. You could save $25k annually but you should aim higher. Go for it.
• Finally, how did you get to almost $2M. Welp compounding interest calculator; $28.5k saved for 25 years at around a measly 6%, and voila. I say measly cuz the average return rates over a lifetime is 10% *Compounding interest separates the rich from the broke. Bonus: If you bought and held a good home, you are looking at $400k profit; you can sell and run away to somewhere overseas. IDC Do you!
• I'm not even counting Social Security checks! If you start at 25-30, set it and forget it, here's your final numbers:

Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it.”

Bonus Supporting Material:

1. Retirement Will Cost the Average American $828,000
2. How much should I save for Retirement?
3. The Habits of the Rich vs. The Habits of the Poor with Tom Corley
4. From -$110k to $115k+ in Net Worth in Four Years

Caution

(Plus) That $1.65M + $400k for the home, you are looking pretty chum at $2M (give or take). You will get taxed on the 401k and (Traditional) IRA. Worry not, what's a $400k tax bill (Minus) to a boss tho. That's just the cost of doing business.

For even more content such as this, stay connected with my Linktr.ee/GQ_accountant. You might also like A Man's Guide to Not Going Broke While Dating, Time to get your very own Linkedin Address, or The Seven Stages of Financial Freedom for Millennials. As always, share, like and definitely begin having the conversation about money before it is too late.