Money Rehab with Nicole Lapin - How To Make $1 Million Before You Retire

Episode Date: February 21, 2024

Who wants to be a millionaire? Everyone— duh. Today Nicole gives you the roadmap to have $1 million in your retirement account by the time you're OOO forever. $ Investors: Robinhood has the only IR...A that gives you a 3% boost on every dollar you contribute when you subscribe to Robinhood Gold. Learn more at Robinhood.com/boost  $ Want the kiddos in your life to become money masters? Check out Greenlight, the best money app and debit card for families (and get one month free!): http://greenlight.com/moneyrehab $ Is mental health a resolution for 2024? Get 10% off your first month of therapy with BetterHelp at: http://betterhelp.com/moneyrehab  $ The secret to health and wealth is in your gut. Literally. Get 20% off a 90 day bottle of Just Thrive Probiotic and Just Calm. Try it at: justthrivehealth.com and use promo code: MONEYREHAB. $ Want one-on-one money coaching from Nicole? Book a meeting with her here: intro.co/moneynewsnetwork 

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Starting point is 00:00:00 I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start, or even too complicated, if, say, you want to put your summer home in Maine on Airbnb, but you live full-time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you.
Starting point is 00:00:38 I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself. Find a co-host at airbnb.com slash host. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no
Starting point is 00:01:18 maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. Members FDIC. SpotMe eligibility requirements and overdraft limits
Starting point is 00:02:05 apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. The game show Who Wants to Be a Millionaire was one of the most popular game shows of all time because of its premise, which is pretty obvious. Everyone wants to be a millionaire. In fact, when Americans were asked to define rich, many say that the definition of wealth is having seven figures in your bank account. But you don't need to win a game show in order to become a millionaire. You can do it the old fashioned way through smart
Starting point is 00:02:54 investing. And you actually don't need a lot of money in order to make this happen. You only actually need 200 bucks to put yourself on a path to wealth. Today, that's the path we're going to go down. I'm going to tell you how you can retire with a million bucks in your retirement account. We're going to use the stock market's historical 10% return to gauge how much the stock market will grow your money year over year until you're ready to kick your feet up and be out of the office forever. On the road to becoming a millionaire, you can think of the investment contributions as the speed that you need to drive in order to get to your destination on time. I'll tell you how fast you should be driving or how much you should be investing in
Starting point is 00:03:27 each decade of your life if you start investing in your 20s. However, this episode isn't just for the 20-somethings. If your 20s are well in your rearview mirror, you can still retire with seven-figure wealth. You're just going to have to speed up a little bit on the highway. I'll tell you what you need to do, but first, let's start with the early birds. Your 20s is your time to build your financial foundation. My God, if I could go back in time. During this whirlwind decade, you should really focus on establishing good financial habits like creating a budget, building out an emergency fund, and starting your investment journey, even if you're not starting with big contributions. If you start investing early, you can really gain compound interest because when it
Starting point is 00:04:09 comes to compound interest, time is actually more valuable than however much or a little you have to contribute. And if you're making contributions in your 20s, those contributions are so valuable because they have over 40 years to grow, assuming that you're planning to retire in your 60s. So if you could swing it, I'd shoot to invest 200 bucks a month. Ultimately, how much you can squirrel away is totally your call. I can't make this investment decision for you, but I will tell you what I would do. I would prioritize my investing budget, meaning I'd find a cheaper living situation in order to make sure I could keep up with that $200 monthly investment contribution. Let's be honest, in your 20s, you're probably not going to be at your house
Starting point is 00:04:48 a lot anyway. Again, your budget during this time in your life is really going to depend on what's possible with your income and all the intangible things that make you happy. I cannot take that test for you, but I can tell you how I'd prioritize. I'd try to make some compromises with my living situation in order to invest in a meaningful, consistent way. And as I take you through these decades, I'm going to track how much you'd have in your retirement account if you follow this millionaire roadmap. If you start investing $200 a month at age 25, assuming a 10% annual return, you'd have just about $15K in your retirement account by the time you turn 30. Your 30s should really be when you hit the gas on your good financial habits. By 30,
Starting point is 00:05:32 aim to increase your monthly investments to $325. A lot of adulting happens in your 30s. You're going to make a bunch of big decisions that will look like choosing a car you can afford, whether or not you should rent or buy a house, and whether or not to start a family or move to a new city. As you're making these decisions that feel so close and so immediate, you really can't lose sight of your long-term investing goals. And if you haven't by now, you should consider automating your investments so you keep consistent investment habits and take advantage of free money, like if you have an employer matched 401k plan. If you can up your contributions to $325 a month, you'll have $105,000 in your retirement account by the time you sunset your 30s. By 40, level up your monthly contributions
Starting point is 00:06:18 to $850. This is the perfect time to check in with your goals for retirement, make sure you're on track, and if you're not, make adjustments so that you can get there by 65. This is also a great time to take a hard look at your income. In your 20s, it can really be challenging to lock in that raise, but by your 40s, you have 20 more years of life experience under your belt, and therefore, 20 more reasons to get a raise. The average millionaire has seven streams of income. By your 40s, you should start thinking about whether or not there's another way to monetize the skills that you've built throughout your career. More income, of course, means that you'll have more wiggle room in your budget to stretch your monthly retirement contribution to $850 a month. And lastly, your late 40s are a
Starting point is 00:07:04 good time to start thinking about your risk profile. As OG money rehabbers know, conventional advice is that you build your portfolio that represents your age in bonds. So if you followed this advice, this would mean that when you're 25, for example, your portfolio would be 25% in bonds and then the rest 75% in stocks. And basically, up until you turn 50, your portfolio would be heavier in stocks than in bonds and then the rest 75% in stocks. And basically up until you turn 50, your portfolio would be heavier in stocks than in bonds. This is because stocks have a higher risk profile and higher chance of reward compared to bonds. And as you get closer to retirement, you should have less exposure to risk. So as you approach 50, you should keep in mind that your allocation
Starting point is 00:07:43 is about to flip. If you follow this conventional allocation advice, you're about to be more invested in bonds than in stocks. And that bond allocation is going to get steadily higher each and every year. If you have more money to play with, perhaps you don't have to be as conservative. As you get into your 50s, though, this is the time to have these conversations with yourself and your financial advisor. If you keep investing $850 a month from $40 to $65, you will have over $2 million by the time you retire. And the coolest part about this is that you'll have $2 million in your account, but you'll have only contributed $306,000. you'll have only contributed $306,000. I know that 306 grand is not nothing, but the fact that your money can grow six times over
Starting point is 00:08:29 is the reason why compound interest is the eighth wonder of the world. Now, if you didn't start investing in your 20s, let's talk. You can still retire with a million bucks, but I'll rip off the bandaid here. You'll need to be more disciplined and contribute more in order to get there. For example, let's say you're 45 and you have zero dollars saved in your retirement fund you can
Starting point is 00:08:50 accumulate a million bucks in your retirement account but you're gonna need to contribute fifteen hundred dollars a month and that is almost double what's required if you started in your 20s now if you haven't started investing before your 40s or 50s, think of this as your catch-up period. Now that that band-aid is off, catching up is not going to be easy. You're going to need to make significant adjustments to your budget in order to carve out the right investment allocation and definitely take advantage of any catch-up contributions allowed in retirement accounts like 401ks and IRAs. This is the time to focus on maximizing your contributions and consider consulting with a financial advisor to optimize your investment strategy for the home stretch.
Starting point is 00:09:31 Net-net, at the end of the day, becoming a millionaire by 65 is an absolutely reasonable goal so long as you have the right strategy and a long-term perspective. By understanding the importance of starting early and increasing your contributions as your financial situation improves, you can set a solid foundation for your future. Remember, it's not just about how much you invest, but also about giving your investments enough time to grow. Start today, if you haven't already. As I say, you're never as young as you are today. And as far as I'm concerned, today is as good a day as any. For today's tip, you can take straight to the bank.
Starting point is 00:10:08 Gosh, this is a really nerdy one, but my favorite tool to keep me motivated and on track with my financial goals for retirement is a compound interest calculator. This is not a joke. For me, nothing gets me more hyped and motivated than seeing my contributions and how they'll compound over time and how much money I can actually make if I keep up with it. So give it a try. And if you're someone who wants to retire before your 60s, you can play around with how much you'll need to contribute if you want to retire early. I love hosting on Airbnb. It's a great way to bring in some extra cash, but I totally get it that it might sound overwhelming to start or even too
Starting point is 00:10:45 complicated if, say, you want to put your summer home in Maine on Airbnb, but you live full time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you.
Starting point is 00:11:15 I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself. Find a co-host at Airbnb.com slash host. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with
Starting point is 00:11:54 features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bank Corp. Bank NA or Stride Bank NA. Members FDIC. SpotMe eligibility requirements and overdraft limits apply.
Starting point is 00:12:43 Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes.
Starting point is 00:13:04 Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.

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