What to do with money over a lifetime

Our guest blogger this week is Barbara Friedberg. she wants to "to educate, inspire, and motivate for wealth in money and life." Her advice in this post is targeted at the recent college graduate.

Your Four Million Dollars


Are you a 23 year old new college graduate making the average $46,000 salary? Are you feeling down about money and wondering how you will ever earn the "big bucks?" Do not despair.

With 3% raises each year, at age 65 you will have earned almost $4 million dollars throughout your lifetime, $3,773,067.00 to be precise. Take a moment and let that sink in. That's a lot of money.


Here's where you take a global view. Consider what type of life you wish to live and what you want to do with your FOUR MILLION DOLLARS. Of course, you can spend all your income as you go along. Or, spend some of it, give some to charity, and save some for the future. Maybe you'll have a bit less fun along the way and maybe not. Remember, wealth in life is not only about money!

Still confused about how to maximize living now and have some cash left for later? Here's some help with the decision-making.

Option 1: Spend it all along the way.
Choose this strategy and you forgo a comfortable retirement because you chose not to save. Your only retirement income will be social security, at a fraction of your prior salary! After age 65 you will be POOR.

Option 2: Spend some, give some to charity, and save 10% per year.
Invest that 10% per year in a diverse portfolio yielding 7% annually. At age 65 not only will you have your retirement income, but after 42 years, your modest annual contribution will have grown to $1,499,905.00 by age 65. And, don't forget, you will have social security income in addition to your million and a half nest egg!

That's correct; your 10% savings will grow to almost one and a half million dollars. How is that possible?

Year 1, save $4,600, it grows at 7% per year.

Year 2, salary increases 3% to $47,3800.00. You save $4,738 and it grows at 7% per year.

Year 3, salary increases 3% to $48,801.00. You save $4,880 and it grows at 7% per year.

Year 4, salary increases 3% to $50,265.00. You save $5,027.00 and it grows at 7% per year.


END OF YEAR CONTRIBUTION- ADD prior years End of year value
with 3% growth value With 7% return

1 $4,600 $4,922
2 $4,738 4922+4738=$9,660 $10,336
3 $4,880 10,336+4,880=$15,216 $16,281
4 $5,027 16,281+5,027=$21,308 $22,800

And so on..........

Your financial future is your decision. Is it worth saving to ensure a long and prosperous life? The choice is up to you.

About the author

Chris Farrell is the economics editor of Marketplace Money.
Log in to post14 Comments


Although I inherently agree with you and the compounding effect of savings over time, you might want to be a bit more realistic for your salary increases and investment returns.

Having been hit by the Dot Com crash, the post 9/11 recession and the 2008 crash & recession, we have lost many years of positive salary growth and investment returns. I would give my eye-teeth for 40 years of 3% salary increases and 7% of returns.

I certainly agree that it's smart to set aside a percentage of your income for your future, and to be generous as well. Living within one's means is vital to being able to have a comfortable life in retirement.

When it comes to personal finance, working for today AND tomorrow is better than just working for today and hoping for the best tomorrow

Very nice article Barb! It is amazing how powerful compound interest is! What percentage of one's income do you generally recommend 23-25 year olds contribute to charity? I've been trying to do 5%....

Compounding interest is a concept that I wish I'd learned when I was 23! Not only are you contributing more each year with your plan, but you're earning interest upon interest as you keep saving. It's definitely worth starting young!

It's always worth saving something for the future. And taking a balanced approach that includes saving, spending, and giving is a great way to both enjoy life and be prepared.

Nice Post Barb! It is a great reminder of the enormous amount of money most of us will make over our lifetimes. Let's hope we all learn how to manage it well.

Great post that brings home the importance of looking at your income for a lifetime, not on a yearly basis. This is good advice for anyone because it is always beneficial to save (though as the post shows, staring earlier is better).

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