A class in personal finance can have a lifetime benefit of $100,000…

7.31.2024

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Last week, we shared an article that said there is a lifetime benefit of roughly $100,000 from taking a personal finance course.

We think the numbers are easily five times that.

It’s an old statistic that has held very consistent over time. Take 100 young Americans starting out at age 25. By age 65, one will be rich and four will be financially independent. The remaining 95 will reach the traditional retirement age unable to self-sustain the lifestyle to which they have become accustomed.
Quoted from memory (and notes) from Bogleheads Guide to Investing so please excuse any typos.
The text then goes on to say the difference between these people lies in what they choose to do with the money that comes into their lives.

I challenged myself to see if I could find $500,000 of value from being educated in personal finance and came up with these three tips in under 10 minutes.

Your credit score could save you $237,000.
The average price of a new home in New York is $750,000. Source.
If you put 20% down ($150k) and borrowed $600k at current 30-year mortgage rates for different credit scores:
BEST credit score (760-850) rate - 6.976% - total interest cost over 30 years = $833,573.
WORST credit score (620-639) rate - 8.565% - total interest cost over 30 years = $1,070,813.
A savings of $237,000 by simply taking care of your credit score.

Source.

2. Start saving small, as early as possible.

If you commit to saving and investing $20 per week in an account that earns an average return of 7% over 40 years, you’d expect to accumulate $230,000. I use Betterment.

3. Save (and invest) your tax refund.

Between 2022 and 2023 the average tax refund was about $3,000, with approximately 2/3 of taxpayers receiving one. Source.

Saving and investing $3,000 annually for 40 years at an average annual return of 7% could help you accumulate another $45,000.

That’s a total of $512,000 using those three simple tips. And we haven’t even gotten to:

paying off high interest rate debt
maximizing tax deductions and credits
reducing taxes on investments by investing long-term
lowering insurance premiums by increasing deductibles
utilizing tax-advantaged retirement accounts
and so much more…

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