Don’t Put Off Until Tomorrow What You Can Save Today

  • Budgeting
  • Monthly savings and how every month everyone should be able to do it
  • The importance of an emergency fund
  • How much money do you actually need to retire
  • Should you be investing while paying off your student loans
  • Invest in the market
  • Why you should use your credit card for essential purchases
  • Why people often behave irrationally when it comes to personal finance
  1. Why it is important to save/ invest
  2. Why it is important to save/ invest now
  3. How much you need to save/ invest
  4. How to save/ invest/ budget
  5. Where you should put your savings/ investments
  • We found a table (see below) of the performance of the S&P 500 (NYSE: SPY) over the last 30 years
  • From that table, we create a normal distribution of SPY performance for any given year
  • From the normal distribution, we randomly selected a rate of return and calculated how much money you would have if you started with $0 and invested $1200, or $100 each month, that year
  • We then repeated this process forty times, each time assuming that the amount you started the year with was equal to the amount you had at the end of the previous year
  • At the end of the forty years, we had an estimated future value of your $48,000 ($1200 a year x 40 years) that you invested
  • We then repeated this entire model one million times and looked at the probability of each future value
  • Are you still with me? I know this stuff is pretty dense
S&P 500, 30-Year Annual Returns. As you can see, the market is more likely to go up than down, which is indicated by the higher percentage of green than red
  • SPY performance is normally distributed
  • SPY performance is not correlated year-over-year (no bull or bear markets)
  • Inflation is not modeled
  • Both compounding and deposits are annual, for simplicity’s sake
  • Compound Interest: interest calculated on the initial amount invested, which includes all of the previously accumulated interest; “interest on interest”
  • Future Value: the value of an amount of money at some time in the future based on an assumed rate of growth
  • Monte Carlo: a simulation that is used to model the probability of different outcomes that are affected by some form of randomness
  • Principal: the original amount of money deposited
  • Rate of Return / Return on Investment: measures the gain or loss generated on an investment relative to the amount of money invested
  • S&P 500: a stock market index that tracks the performance of 500 large U.S. companies. Many consider it one of the best representations of the U.S. stock market. The New York Stock Exchange ticker of the ETF that tracks the S&P 500 is SPY




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Jesse Lusa

Jesse Lusa

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