How I lost 1 Million dollars in my 20s

I graduated college at 22, and just like many others, I got my first gig at a nice corporate job. I interviewed well they told me and they offered $50,000/year plus benefits. Wow – I said – that is pretty good. I can now move out of my parents’ basement and get my own apartment where my girlfriend can visit and even stay over if she can. Because I was craving that new car smell and had been eyeing this nice Honda for all my last 2 years at college I went to the dealer and bought myself a new car. Not a biggie I thought, just $400/month that I could afford. My rent was $1,200/month and my phone, internet & cable were just under $200. But where did I lose the million dollars?

I also had some other expenses, but my student loan kicked in after 6 months of graduation and the payment wasn’t that small, $350/month for the next 10 years. Wow, that education was going to follow me for the next 10 years I thought. But still, the new job, new apartment and friends, as well as the nice happy-hour places near work kept my mind away from it.

I didn’t think I was going out much, just here and there, plus the typically purchased lunch at Chipotle or Panera which were both very close to work. I liked that I could order ahead and just pick it up. Happy hours weren’t too bad either, but still cost me about $30-40 depending if I wanted something that wasn’t on the happy hour plus the typical appetizer or two that went with it. Probably I was spending about $400 a month on eating/drinking out, I thought. But thinking back it was probably more, I just didn’t know as I never kept track. Life was good, and I was having fun. And I still couldn’t figure out where I lost all that money.

My 20s were fun, mixed with friends, happy hours, 3 different jobs, a nice car which got expensive to maintain as it got old and other stuff which I really can’t remember, and probably don’t matter anyways. While I kept up with my bills and had fun, even though I got my regular 3% annual raises I didn’t save anything for my retirement. The first job had a 401K plan, but I didn’t enroll as I wanted to keep most of my income, the second didn’t have any, and the third one had a plan, but I only stayed 2 years and didn’t bother joining. I didn’t know anything about IRAs or investing in general as I thought that you had to have lots of money to do it and also that the financial industry was very much self-serving and out there to squeeze me. I also thought I had time to think about retirement and starting then wasn’t a priority. Now in my 30s I had nothing saved for my future.

This is not my story, but a fictional average graduate with student loans (70% of graduates have student loans and class of 2016 had on average about $37,000 in student debt), getting an average job (at $50K/year) and doing stuff as most 20-30-year-olds do, while 72% of them have nothing or less than $10K saved for retirement.

Now if this graduate had started saving 10% of his/her gross income after graduating ($5K/year or ~ $400/month) and kept the same $400/month until retirement at 67 s/he would have approximately $2.1 million dollars saved (assuming a reasonable 8% average annual return; US stock markets have returned about 10% on average over the last 30 years). By starting at 30 instead, s/he lost $1 million. Assuming that this person will continue saving from now on,  ($400/month till retirement at 67) s/he would have just $1.1 million. A cool $1M less, or another way of seeing it as much as s/he would accumulate over his/her next decades, the 30s, 40s, 50s and 60s Combined.

And that’s how the average graduate not investing in his or her 20s can lose up to $1 million in his/her retirement assets. The $400/month for the 8 years (22 to 30) that s/he didn’t invest would have cost just $38,400 for a potential return of $1 Million in retirement – and that’s a return that no-one can laugh at. In order to get back to $2.1 million, now in the 30s, s/he has to double the monthly investment to $800/month, and that’s not so easy to do, so don’t waste your 20s, as time becomes really expensive later on.

The same lesson can apply for any point in time that you currently are. While the cost of waiting is huge at your first years after school, waiting to start can hurt your retirement assets at any time, so just start as soon as possible. You can run your own calculations about what it would cost if you waited to invest, HERE and see that even 1 or 2 years of waiting have a negative effect on your future. Don’t waste your 20s and don’t waste more time crying over your 20s if past them – just start NOW, and if you can’t at $400/month just start at $200 or even less, but start and create a habit.

While the past is gone, we can help increase your knowledge so you can make the most of your present and future. Let us be your coach and help you plan for your future.  And if you’re on track for retirement, then help us spread the knowledge that many more still don’t know. How? By sharing this post in your social media channels or even inviting us at your school, college, workplace or association for a Free Financial Literacy Presentation. Contact us at info@standupadvisors.com. Thank you.