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Thread: Some Simple Math. . .

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    Member Miss Six's Avatar
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    Default Some Simple Math. . .

    I was getting ready in the dressing room Saturday night, and was listening to one of the girls talking about what a hard time she had saving money, and how she thought after dancing for two years, she'd have more money in the bank, but instead, she only had a few thousand dollars in her savings account. This is a pretty girl, reasonably intelligent, decent personality, who makes money. Probably $200-400 a shift. AFAIK, she doesn't have children, and lives in an apartment with a roommate. It occured to me that her situation and lifestyle was kind of similar to mine, so it got me thinking about what I want to have when I retire from dancing. I'm 21 right now, and I think another five years would be about what I would be comfortable with. After thinking about it a while, I came to a couple conclusions: The first, that if I were able to keep my expenses down, (and I can, with proper planning), it would be reasonable to save upwards of $100,000 in a 5-year time period. The second, that having $100,000 in the bank when I'm 26 is not something I would be unhappy with. (And a third conclusion: There is a lot of investing and business opportunity available with that amount of money. Not to mention the interest involved.)

    So I did some math to see how easy it would be. Frankly, it's not only reasonably easy, it is RIDICULOUSLY easy.

    Follow with me.

    5 years x 52 weeks = 260 weeks, the number of weeks to accomplish this goal.

    $100,000 / 260 weeks = $385 saved per week to accomplish this goal.
    $385 x 4 weeks = $1540 saved per month to accomplish this goal.

    $385 / 3 days = $129 per shift if I work 3 shifts a week.
    $385 / 4 days = $96 per shift if I work 4 shifts a week.

    I think this is the first time I've really sat down and put everything into perspective, on paper, for myself, about the money that I earn, and what it can add up to. From here, I can figure out my expenses, and budget around a goal. Yes, there will be times where I may have to take money out of my savings. I may need a new car, or be behind on rent, or something like that, but it's nice to have a goal, and a realistic one, at that, to work for.

    It's just a thought: Think about what you want in five years, and do the math. It's probably easier than you think.
    "All the world's a stage, but the play is badly cast." - Oscar Wilde

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    Banned Melonie's Avatar
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    Default Re: Some Simple Math. . .

    $385 / 3 days = $129 per shift if I work 3 shifts a week.
    $385 / 4 days = $96 per shift if I work 4 shifts a week.

    I think this is the first time I've really sat down and put everything into perspective, on paper, for myself, about the money that I earn, and what it can add up to. From here, I can figure out my expenses, and budget around a goal. Yes, there will be times where I may have to take money out of my savings. I may need a new car, or be behind on rent, or something like that, but it's nice to have a goal, and a realistic one, at that, to work for.
    Actually it's more like $170 for a 3 shift week and $135 for a 4 shift week. Why ? Because every bit of money that you intend to save or invest will be reported by the bank or brokerage. This means that every bit of money that you intend to save or invest must first be reported to the IRS and to your state tax dep't as income, and taxes must be paid on that income. Therefore to actually save or invest $129 you'll need to earn $170 to have $129 left after paying $41 in income taxes (guess).

    If you report 'some' income, the IRS will also know that any person putting money into savings or investments must also be earning enough additional money to pay for basic costs of living, rent/mortgage, and car payments first. Therefore this actually means that to save $129 you'll actually need to earn and report more like $350, leaving say $250 after taxes. This would be enough reported income to explain to the IRS how you were able to spend say $121 on essentials and still have $129 left to invest.

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    Member Miss Six's Avatar
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    Default Re: Some Simple Math. . .

    Quote Originally Posted by Melonie

    If you report 'some' income, the IRS will also know that any person putting money into savings or investments must also be earning enough additional money to pay for basic costs of living, rent/mortgage, and car payments first. Therefore this actually means that to save $129 you'll actually need to earn and report more like $350, leaving say $250 after taxes. This would be enough reported income to explain to the IRS how you were able to spend say $121 on essentials and still have $129 left to invest.
    Very true. I was not implying that I should drop every penny possible into savings and assume that leaves nothing to live off of, or that the IRS wouldn't get involved into it. My math was based off of the simplest possible amount I'd have to put in, after all other considerations are met. (Hence my comment about keeping expenses down.)

    I'm just impressed by the fact that it's a fairly reasonable amount to set as a goal; I had initially assumed it would be a much more difficult goal to reach.
    "All the world's a stage, but the play is badly cast." - Oscar Wilde

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    Default Re: Some Simple Math. . .

    Melonie is absolutely correct to include taxes but she left out the money earned on the savings for the years it is saved.

    On an after tax basis to get to $100k in 5 years you need to save $16,801 a year if you earn a 7% return on the money. Capital gains makes up the rest of the return. The difference on taxes and the earnings partially offsets. In my example I assumed that you paid the taxes on the earnings out of current income but something close to $140 (tax deffered ira etc) -$150/shift would about do it.

    The hard part is the discipline to say NO to yourself when you have money in the bank to buy that vacation or big screen TV. One approach is to work 1 extra shift every other (or third) week and dedicate that to an "untouchable retirement fund". (does not have to be an IRA)

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    Default Re: Some Simple Math. . .

    This is a great idea. Of course, pulling $100-140 out of every night's earnings takes a lot of discipline. It's an admirable goal though and I hope you make it happen!

    That would be such a nice nest egg at the end of your 5-year plan. Imagine if you did it for 10 years...or more

    If you had $1mil, you could retire!

    I met a customer recently that had retired at 40 and he said he put $3 million away and was earning $360k/yr on interest. He said banks give that kind of interest rates if you have that much money. He started saving everything in high school, so he got a head start on most people.

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    God/dess montythegeek's Avatar
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    Default Re: Some Simple Math. . .

    Remember time is your friend when it comes from compounding.
    $100K in year 5 becomes $140K at 10 and $196K at 20 years. Without putting another dime in.
    Work/save for 10 years and you have $240K at 10 years and $337K at 15, $472K at 20 years. That is why IRA/Keoghs are so valueable if started early.
    If a 25 year old dancer works 10 years and saves $16,801 a year and does not touch it until 65 it has grown to $1.8 million. That is one hell of a nice nestegg for a real retirement.

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