The Retirement Gamble.

Watch this video from Frontline. You may need to explore more of the web site to find answers to the questions below.

http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

Answer these questions on a sheet of paper. Use complete sentences.

1. What are some factors that keep people from saving as much as they should?
2. What role does the financial services industry play in keeping people from retiring with as much money as they should?
3. What is expense ratio? How is it used to calculate dollar amount expenses?
4. How much does a typical investor pay in fees? You may find more info in the following link:

 http://www.investopedia.com/articles/stocks/08/fees-commission-value.asp

5. What mistake do most people make when the market drops in value?
6. Who is John Bogle and what radical idea did he bring to the market?

http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/retirement-gamble/index-funds-the-key-to-saving-for-retirement/

 Look up the current stock price of the Vanguard 500 Index fund here

http://money.cnn.com/quote/mutualfund/mutualfund.html?symb=VFIAX

What is the expense ratio of this fund and how does it compare to the industry average?

Assignment: Calculate your lifetime returns using the returns of the Vanguard 500 less the expense fees. Compare the expense fees of this fund to the industry average. Assuming that you invest 300 per month, what is the amount of money you save compared to the industry average?

Turning $10 into $1 million.

Today, we're going to take that 10% savings and turn it into a 1 million fortune. It's not magic, but it does take discipline. First, you have to commit to saving 10% of your income. THat may mean that while your friends are going to the movies all the time, eating out, wearing the latest fashions, and driving nice new cars, you're renting videos, staying home, driving an older car, and wearing your clothes a bit longer. The payoff is that while your friends are working till they die, you'll be retired at a beachfront home!

Here's how to start out. First, calculate your yearly savings across the top of your spreadsheet. Calculate your yearly savings by multiplying your monthly saving by 12 months. So at the end of the first year, you have $3000 saved. Now, multiply that amount by 10, 20, 30, 40 and 50 years. You'll see that by the time you're in your 60s, you have about $150,000. While that's a nice sum of money you still can't retire on it.

The secret lies in investing wisely and compounding your saving. If you go to this Web site or any others, you'll find that the annualized return of the S&P 500 is between 6% and 7% over the lifetime of the market. That means, if you invest in the stock of the 500 largest companies in America, you would yield a return of about 6.5%.

We're going to assume that that interest gain in paid yearly and all of your gains are reinvested in the stock market and you don't pull any money out early. That's the tricky part. Can you stop yourself from taking out money to buy a new pair of Nikes.

Calculate the first years returns by multiplying $3000 times 6.5% to yield  a first year's savings of $3195. So, instead of making $3000 you actually have $3195. Next, you take that number and add the next $3000 to it to get to the beginning of year 2. Multiply that about times 6.5% and you end up with the next years ending balance of $6597. So at this point you've not just saved $6000, you have an extra $597 that you've earned. Congratulations!

https://docs.google.com/spreadsheets/d/1yB1St0hEtlDw9715uB1dnRpAbh1NRQrYAdT_261wTgE/pubhtml

Now, you just need to keep going. Do the same thing until you get to year 10. Now, compare what you've put back to what you actually have in the bank! Instead of $30,000, you have over $43,000. If you have the guts, you can keep saving and compounding your gains. By the time you're at year 50, you've made over $1 million. Enjoy your retirement!

Creating a Budget

One of the best things you can do with Google Sheets is to create a simple budget. Start with listing what you need to know. First, you need to know how much you are bringing in each month. For this case, we'll assume that you are bringing home $2500 per month after taxes, Social Security and health insurance. So, now that you know how much you are making, what do you need to do next? Well, because we are smart, we're going to save 10% of our income ($250) and invest it. Think of this as paying your future self. We'll talk more about this later. For now, lets just save 10%. Next we'll need to list our expenses. Since you probably don't have any expenses now, you have a chance to make decisions about how you'd like to live. Start out with the major expenses of your life, rent/mortgage and auto expense. At this point we won't go into the wisdom of renting over mortgage or buying a car over leasing one or vice versa. Lets just list the major expenses assuming that you are living alone with no children. Feel free to adjust these numbers to fit your personal lifestyle.

Rent/Mortgage $600
Auto Expense $300
Groceries $250
Utilities $300
Clothes/Shoes $200
Gas $200
Entertainment $200
Taxes $100
Insurance $200
Cell Phone $70
Haircare $40
Misc $50

Now, you'll need to enter this data in a spreadsheet. Here is a sample of what you'll need to do.

https://docs.google.com/spreadsheets/d/1YhZPrvfx4Z9w_O92OVZJ3vtXn8-5yF5C5kn4qCCRgr4/pubhtml?gid=0&single=true

Here are a few tips:

1. To calculate your net take home pay, subtract the saving amount from $2500. 
2. Calculate your total expenses by adding up the entire expense column. in this case the formula is =SUM (B7:B18)
3. Subtract the total expense cell from the net takehome cell to see if you are in budget. If you aren't, adjust your expenses to stay within you budget.

Place your Budget spreadsheet in your spreadsheets folder. 

Introduction to Google Sheets

We're going to begin using Google Spreadsheets for the next several weeks. You may already be familiar with using spreadsheets or you may have never used a spreadsheet program before. I'm going to assume that you've never used a spreadsheet before so we'll start off slow. Watch this beginners tutorial on Google Sheets.

Now that you've been introduced to Google Sheets. Try making one yourself. First, create a folder on your Google Drive and call it Spreadsheets. You'll place your work in here for review so please share it with me. Now you won't have to share each individual file. I'll just check your folder to give you your grade so make sure your work with Google Sheets is in this folder! Remember, if I can't see your work, I can't give you credit.

Now, make a class roster using these steps.

1. Create your column headers on row 1. Your headers should be Last Name, First Name, Class, Sex, Height

2. Enter the names of the members of your class in the following rows. If you need to ask their heights just ask.

3. Try using the sort function to sort A-Z for each of the columns. After you sort the selection by sex, proceed to step 4.

 4. Make the following calculations using the function section of the menu.

• calculate the total height of the class in inches
• calculate the average height of the entire class
• calculate the average height of the females 
• calculate the average height of the males 

Use this as your guide.
https://docs.google.com/spreadsheets/d/1tR5ZCUxPYvSHFbi7n8BUSTfytfoGx3SCxGLApUkepiE/pubhtml