Economics Unit 5Personal Finance

Who wants to be a millionare??

How?

•Play the Texas Lotto?

Question 1:

•Are most millionares college graduates?

• Yes•4/5 millionaires are college graduates•18% have masters•8% law degrees•6% medical degrees•6% Ph.D.

Question 2:

•Over/under 40 hours a week worked by millionaires?

•Over.•About 70% of millionaires work between 45-55 hours a week.

Question 3:

•True/False:

Over half of millionaires received money from a trust fund (parents) or inherited most of their money.

•False.•Only 19% received any income/wealth of any kind from a trust fund•Less than 10% inherited more than 1/10th of their wealth.

Question 4:

•Do more millionaires have American Express Gold cards or Sears cards?

•Sears card.•28% have credit card•43% have Sears card

Question 5:

•Do more millionaires have Cadillacs or Fords?

• Ford.• Ford is preferred by 10% of millionaires•Cadillac is preferred by 8% of

millionaires• Lincoln is preferred by 7% of millionaires•Only 23% of millionaires drive a current

year (new) car

Question 6:

•Do most millionaires work in big Fortune 500 Companies?

•No.•About 3/4 of millionaires are self-employed•Consider themselves to be entrepreneurs

Question 7:

•Do many poor people become millionaires by winning the lottery?

•No.• Few people get rich the easy way.• The chances of winning the lottery

are 1 in 12 million• In contrast, you have a 1 in 1.9 million

change of being struck by lightling

Question 8:

•Over/under 50% more income college graduates earn over their high school graduate counterparts?

•Over.•College graduates earn 66% more than high school grads•People with professional degrees earn 150% more than the average high school graduate

Question 9:

•Do day traders usually beat the stock market and become millionaires?

•No.•Recent studies suggest 80% of day traders lose money.

Question 10:

•If you want to be a millionaire, should you avoid the risky stock market?

•No.• Almost 95% of millionaires own stocks.• Since 1926, stocks have increased at

11% at a compounded, annual rate of return.• 11% exceeds any other type of

investment.• Investing in stocks does involve risk.

Question 11:•At age 18 you decide not to drink one coke a day and save $1.50 each day. You invest this $1.50 at 8% annual interest until you are 67. •At age 67, would your savings from not drinking one coke each day be over/under a quarter of a million dollars?

•Over.• It would be almost $300,000 •Because of the power of compound interest, small savings can make a big difference.• It pays to save and live below your means.

Question 12:

• If you save $2,000 a year from age 22 to age 65 at 8% interest, your savings will be about…

How much?

•Over $700,000•Regular saving will make you a millionaire even if your income is modest.

Question 13:

•True/False:

•Single people are more often millionaires than married people.

•False.•Most millionaires are married and stay married.

Improving your financial life:

• Get a good ecucation.• Work long, hard,

and smart.• Learn money-

management skills.• Live below your

means.

• Buy a home.• Save early and

often.• Invest in mutual

funds/common stucks for the long term• Gather information

before purchasing

Net Worth• Assets: What you own and can exchange for value.

This includes any savings, houses, cars, personal possessions, etc.• Liabilities: Money you owe others. This could include

mortgage, car loans, credit card, debt, student loans, etc.• Assets – Liabilities = Net Worth• People can have a large income and still have a low

net worth if they have many liabilities.