Where is Your Money Going?

If you work for 40 years and make a steady salary of $100,000 (assuming no increase, just flat) you will earn $4 Million. By age 50, you will have earned $3 million. You will make $1 million every 10 years, but the sad truth is many will have very little to show for it. But where is it going?

I know $100,000 is not an expected starting salary, but staying flat on your salary over 40 years is also unrealistic. If your salary is not growing then you need to figure out what you can do to increase your earnings. See my post Why are you not Growing.

Let's get back to it, where is all that money going over 4 years and why are people in their 50s with less than 250k in their retirement accounts? (See my post here about this)

1) Taxes: We all complain about taxes, but they are a reality and over 40 years you will pay the federal and state their fair share. In PA, we are only at 3%, but if you are in NY or CA...10%+ is what you are looking at. PA makes it easy to give me a clean 25% total, meaning over 40 Years, you'll pay $1 million in taxes. Not too bad, since you still get to keep $3

2) Housing: This is usually your most expensive line item and should be no more than 25% of your take-home pay. Why? Because that is why people are not saving. House rich, savings poor! That is another $1 million for housing. Ok, so now you have $2 million left. Where is it going?

3) Everything else: No easy way to do it, since this is personal and depends on your life, family, where you live, etc. Only about 25% should total up to everything else, including groceries, gas, phone, and insurance. That should be about $2,000 per month on the $100,000 a year salary.

What is left is what you should be saving for 40 years, roughly $1 million. Now I believe in the tithe, 10% goes to the church, so I'll happily keep $600,000 over the 40 years and give the $400,000 to God (yes, the 10% is off of gross). What can that $600,000 become? That equates to $1,250 per month invested, with compound interest, invested properly, that means $7.9 million in retirement at the age of 60 (10% annual return, 40 years), or 2.8 million by the time you are 50.

What is happening to what we have left? Only you know the answer to that. Did you look back at what you spent last year? Did you look back at what you saved last year? It is time to dig in, know your numbers, and get started, every year you put off is a year of compound interest that is working against you.

Next week, let's talk about where I believe this money going... Stay tuned, and take control of your dollars.