The Millionaire Game

The Millionaire Game How to Really Be a Millionaire

Question 1 Most millionaires are college graduates.

True • 80% of millionaires are college graduates • 18% have Master’s degrees • 8% law degrees • 6% medical degrees • 6% Ph.D.s

Question 2 Most millionaires work fewer than 40 hours a week.

False • About 2/3 of millionaires work 45-55 hours a week.

Question 3 More than half of all millionaires never received money from a trust fund or estate.

True • Only 19% of millionaires received income or wealth from a trust fund or estate. • Fewer than 10% of millionaires inherited 10% or more of their wealth.

Question 4 Most millionaires attended private schools.

False • Most millionaires attended public schools. • Fewer than 20% of female millionaires attended private schools.

Question 5 Most millionaires drive expensive new cars.

False • Most millionaires spend under $30,000 for a car. • Only 23% drive current year cars.

Question 6 Most millionaires work in glamorous jobs, such as sports, entertainment, or high tech.

False • A majority of millionaires are in ordinary industries and jobs. They are proficient in targeting marketing opportunities.

Question 7 Most millionaires work for very large public companies.

False • ¾ of millionaires are self-employed and consider themselves to be entrepreneurs. • Most of the others are professionals such as doctors, lawyers, and accountants.

Question 8 Many poor people become millionaires by winning the lottery.

False • Few people get rich the easy way. • The chances of winning the lottery are 1 in 12 million. • The average person playing the lottery everyday would have to live about 33,000 years to win once. • 1 in 1.9 million chance of being struck by lightening. • Pregnant woman has a 1 in 705,000 chance to have quadruplets.

Question 9 College graduates earn about 60% more than high school graduates earn.

True • The average college graduate ($53,000) earns about 62% more than the average high school graduate ($32,552). • People with professional degrees ($79,508)earn about 150% more than high school graduates. • A high school dropout earns $23,608. A H.S. diploma increases average wages by 38%.

Question 10 An average 18 year-old high school graduate spends as much as an average high school dropout until both are 67 years old. The high school graduate invests the difference in his/her earnings at 8% annual interest. At age 67 the high school graduate would have $5,500,000.

True • Yes, the average person would spend some of the difference. • The difference in income between a high school graduate and high school dropout at age 18 is $8,000.

Question 11 Investors who buy and hold stocks for the long-term have better long-term stock returns than those who buy and sell stocks more frequently.

True • 80% of day traders lose money.

Question 12 If you want to be a millionaire, avoid the risky stock market.

False • Long-term, the S&P 500 Stock Index has increased at about 10% compound annual rate of return, a better rate of return than most other investment. • Of course there is risk and there is no guarantee of a 10% rate of return in the future. • Comparing $1 invested in the S&P 500 and U.S. bond in 1926. By 2007 the bond is worth $76 and the shares of stock are worth $3,286.

Question 13 At age 18 you decide not to drink soda from the vending machine and save $1.50 a day. You invest this $1.50 a day at 8% annual interest until you are 67. At age 67, your savings are almost $300,000.

True • Because of the power of compound interest, small savings can make a difference.

Question 14 If you save $2,000 a year from age 22 to age 65 at 8% annual interest, your savings will be over $700,000 at age 65.

True • Because of the power of compound interest, the earlier you begin saving, the better. • Regular saving can make you a millionaire, even if your salary is modest.

Question 15 Single people are more often millionaires than married people.

False • Most millionaires are married and stay married. • Financially speaking, divorce is expensive; it is potentially a gateway to poverty, especially for women.

Tally your score • Make sure you subtract points for the questions your answered incorrectly. How did you do?

Rules for Improving Your Financial Life • Get a good education. • Work long, work hard, and work smart. • Learn money-management skills. • Spend less than you could spend. • Save early and often. • Invest in common stocks for the long-term. • Gather information before making decisions.

Economic Reasoning • People choose • All choices involve costs • Opportunity Cost: The best alternative that a person gives up to get something. This is the next-best option to the one actually chosen. • People respond to incentives in predictable ways • People create economic systems that influence choices & incentives • People gain when they trade voluntarily • People’s choices have consequences for the future

Educational Choices • Average Annual Earnings • High School Dropout • $23,608 • High School Graduate • $32,552 • College Graduate • $53,300 • Bureau of Labor Statistics (2009)

Choices • We make choices everyday • Must be able to: • Identify the problem • Identify/list the alternatives • Weigh the criteria that can be used to evaluate the alternatives • Make the best decision

Scarcity • Why make choices? • Can’t have everything you want • Natural Resources • Water, oil, minerals • Human Resources • Strength, intelligence, organizational ability • Capital Resources • Machinery, equipment, tools, buildings • Capital: goods used to produce other goods & services

Job Application Process • Look for job openings • Write a letter of application • Prepare a resume • Complete the application • Participate in a job interview • Write a thank-you letter

Finding Job Openings • CareerOneStop • www.careeronestop.org • Find job banks • Monster.com • Careerbuilder.com

Resume • What to include: • Name • Telephone number • Street address • E-mail address • Career objective • Education • Work experience • Abilities • Other information that might apply • Interests, awards, offices held in organizations, extracurricular activities, • Names of references

Job Interview • How to conduct yourself: • Know the company • Arrive on time • Go alone • Dress appropriately • Be poised & confident • Have a firm handshake • Establish eye contact • Communicate clearly • Be ready for open-ended questions • Emphasize your strong points • Ask questions • Be positive

Entrepreneurs • Entrepreneurs tend to be: • Independent • Confident • Hard-working • Well organized • Risk-takers • Self-starters Reed Hastings Debbie Fields Steve Jobs

Working For someone else For yourself Stability will depend on your own efforts, success is based on the success of the business Work hours may be long, but you can determine Income may be low early on, but may increase a great deal over time Will have control over work & workplace • Stability & success will depend in part on others • Work hours generally are predictable • Salary will be in a pre-determined range • Won’t have control over work or the workplace environment

Income Differences between Jobs • Income: Money people earn by working—e.g., wages and salaries. This also includes money earned in other ways—e.g., interests or dividends from investments • How to increase income from work: • Demand for job • Natural ability • Hard work • Getting along with others • Self-discipline • Human Capital: The knowledge, skills, talents, and health that people bring to their work

Differences • HS Diploma vs. None • Diploma: $27,963 • No diploma: $20,246 • Difference: $7,717 • Over 40 years • $7,717 x 40 years • $308,680 • College Diploma vs. HS Diploma • College: $48,097 • HS: $27,963 • Difference: $20,134 • Over 40 years • $20,134 x 40 • $805,360

Level of Education • Vocational Degree • Less than a 2-year degree • Associate’s • 2-year degree • Bachelor’s • 4-year degree • Master’s • At least 1-year beyond a bachelor’s degree • Professional • At least 2-years beyond a bachelor’s degree • Doctoral • Highest earned degree in U.S. postsecondary education

Education & Jobs Fastest-Growing Slowest-Growing Long term on-the-job training Short term on-the-job training Work experience • Associate’s degree • Master’s degree • First Professional degree

Taxation • You have a part-time job. You work 15 hours per week at $10 per hour. • How much will you bring home after one week? • Gross Pay: The total amount of money an employee earns before any deductions are made • Net Pay: The amount left after all deductions for taxes and benefits payments are taken out of the gross pay. • This is sometimes called take-home pay.

Deductions Mandatory Other Life insurance Disability insurance Medical insurance Dental insurance Retirement savings plan Contributions to charity • Federal income tax • State income tax (not in Nevada) • Social Security tax • Medicare tax • Local income tax (not in Henderson)

Tax Rate • The highest rate at which we’re taxed is the marginal tax rate

The Millionaire Game