403(b) Plan

finance a la shmoop. how do you stay rich after you get rich ? spend less than you

make. how's that sound yeah genius. well but pretty obvious and

easy to do if you earn enough money to do so, right? so if you're watching this [man sits down to eat]

video you're either rich or you plan to be, and you want to stay that way pretty

much forever until your doing you know the backstroke Six Feet Under.

well the way in which you got rich in the first place here matters a lot. for

many a long successful corporate career got them to the nice houses the

convertible Ferrari the private school for the kids the custom golf club set

and the wine collection. their wealth just accumulated slowly over time but

likely in two forms. in America most senior executives receive nice cash

salaries half a million a million a few million dollars a year. they live off

that pay and save some of it. but their real wealth usually comes from partial

ownership in the big corporations they run in the form of stock options. well at

the end of a career the options might have compounded for decades and be worth

tens of millions of dollars or more. typically the executives slowly sells [stock chart]

off those options in retirement and looks back on an awesome corporate life

optimizing the sale of soap or lawn fertilizer or car tires or whatever they

did to get rich in the first place. not a bad way to go if the corporate gig is

for you and you don't read about these people going bankrupt very often because

a well let's face it they're probably pretty boring. or at least their career

selling soap was, and B they got rich slowly accumulating wealth quietly

almost hidden to them and to their friends over long periods of time. they

were technically probably rich in their mid 40s or so and they just continued to

dance the dance that brought them to the party in the first place.

so that's the get rich slow plan and it is time-tested it works. but what about [people throw a party]

the get-rich-quick plan you're a 260-pound runner with a four point four

second forty. you can read so you were accepted to Alabama where you don't

graduate. you're drafted by the Jaguars and you get a

million dollar signing bonus. your buddies ask you hey pal what time is it

you look confused they say Ferrari time and ah here's

where our story gets sad. you forget a whole bunch of things mainly that it's

likely your NFL career will be short and when it's done you will likely have the

earning power of a high school football coach. like you know 50 60 grand a year

or something like that not terrible just not rich. oh and there's this other thing

called the taxes. that million dollar signing bonus was really nine hundred

fifty grand after agent lawyer fees travel and other stuff then he paid [equation pictured]

taxes of three hundred fifty grand and netted six hundred K in your pocket. but

you just went out and spent four hundred fifty grand buy that Ferrari so now you

have just one hundred fifty grand left in your pocket to buy that home how's

this shoebox look. so you wait hope your rookie seasons a hit and as you drive

around in your Ferrari you wonder if people will laugh at you if you happen

to flame out and you realize too quickly that if you go to sell the car in two

years that'll maybe bring you 200 grand. and yeah Ferraris depreciate fast. sad

story but way more interesting than the soap seller. in fact most NFL players

like eighty percent of them go fully bankrupt. which means that another ten to

fifteen percent of them end up just really really really not wealthy. how can

this be if they played in the NFL at least at one point wouldn't you have [pie chart]

considered them to be rich or at least rich ish? no but something bad clearly

happened here. well in almost every case at least one of three things happened.

they spent too much money spent on junk they didn't need or couldn't afford like

that Ferrari. B they invested their savings into restaurants or bars or

other things where the odds of success were vastly stacked against them winning.

or see they got divorced. yeah always a financial killer there. well want the to

long didn't listen version don't spend your money like you're gonna make your

current salary for the rest of your existence.

stuff happens enjoy life but protect yourself by holding on to enough savings

as should things take the ugly turn. invest wisely and all that and maybe see

a marriage counselor. if you want to know what it all boils down to, keep making

money yeah you never have enough because you know

what's gonna happen. that doesn't mean you need to pound the pavement selling[man goes through air port]

vacuum cleaners till you're 95 but you also shouldn't call it quits at 45

because you're finally a millionaire yeah a million bucks just ain't what it

used to be.