I took Huggard's personal finance class several years ago. I seem to remember him saying that if you made a one time $2500 initial investment with a 12% rate of return it would be 1,000,000 in 25 years.

I don't know if this is right, I cannot get the math to work out to be $1,000,000. Does anyone know how to work these time value of money problems, or if this is even possbile.

2/14/2006 9:11:37 PM

in excel:

=FV(0.12,25,0,2500)

it ends up being around 42500

[Edited on February 14, 2006 at 9:15 PM. Reason : .]

2/14/2006 9:15:34 PM

Yea I was about to say, you are way off.

2/14/2006 9:16:38 PM

Lets assume you put 2500 in yearly for 25 years with a 12% rate of return then what do you have?

2/14/2006 9:17:17 PM

tell me where you get 12% returned guaranteed.

2/14/2006 9:17:20 PM

1. change the 0 in the formula above to 2500
2. learn excel
3. ...
4. profit

the stock market

[Edited on February 14, 2006 at 9:20 PM. Reason : ]

2/14/2006 9:20:14 PM

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

There are better ones than this, but you'd end up between 400k-450k depending on the type of compounding.

[Edited on February 14, 2006 at 9:27 PM. Reason : k]

2/14/2006 9:24:26 PM

Except that 25 years is a long time that the Go'vt/Fed will have to steal that return away with inflation. At least 3/5, probably more, of that million (even if you did get that), after 25 years, will be eaten up entirely by it.

It's an impressive-sounding number that assumes an absurdly high consistent return, but it still ain't even close to what you'll need to be, compared to today, a "millionaire."

2/15/2006 1:30:51 PM

Probably safe to say you need to put away 10-15% of your income every year for about 40 years if you wanna be really well off after inflation and taxes. Invested of course.

[Edited on February 15, 2006 at 2:35 PM. Reason : .]

2/15/2006 2:35:07 PM

^ Or make a whole lot of money for 10 years instead of just working a j-o-b for the man for 40.

2/15/2006 2:57:19 PM

^
If you can make that kind of money coming out of college, more power to you. Otherwise, the rest of us have debts to pay off, families to raise, etc. etc.

What I do:
-Save 10% strictly for retirement. Using that calculator, ~$5000/yr, 5% (ridiculously low rate), 50 years = $1.1 mil.
-Save another 10% in other savings accounts (vacation, house down payment, oh shit fund, etc.).

2/15/2006 5:07:48 PM

One time deposit: FV=PV(1+i)^N

[Edited on February 15, 2006 at 5:11 PM. Reason : tryh]

2/15/2006 5:09:59 PM

Huggard's examples of investing to make $1,000,000 state you and your wife each make $25,000 and invest 15% (50,000 x .15 = $7500) per year and earn a 12% rate of return.

He said inflation wouldn't have any affect because your income will rise so as long as you stay at
15% the $7500 now will adjust with inflation, as will the $1,000,000.

And the 12% ror is the long run average of the stock market. So it's definately not a sure thing, but a well diversified portfolio could potentially give you that. Of course its all hypothetical, but not completely unreasonable.

2/15/2006 7:04:32 PM

huggard is a stupid fuck

2/15/2006 8:25:01 PM

Most personal finance experts say that you should only expect to make 4-5% above inflatation annually, after investment fees, in the stock market over the long term.

2/16/2006 3:19:20 PM

I think it'd be wise to go into working in finance... look how many people need financial advising.

2/16/2006 3:38:58 PM