Think for a moment what that means. In the USA in 2007 the Gov says you are living in poverty if your income is $10,400 annually for a single person. That is an income of $200.00 per week. Imagine your lifestyle on $200.00 per week. You get a nice studio apartment in a crack house for $500 per month. Paint peeling off the walls, drafty, tape on the cracked window. Leaves you with $85 per week for paint, heat, electric, clothes, food, transportation (WTF, you aren’t going anywhere). It all seems pretty grim.
You however, are determined to not let that lifestyle happen to you. And you are willing to work to make sure it does not. First thing you do is getter a better apartment. You cannot take the chance of being out of work because you got sick living in a rat infested crack den, or missing days of work because your wheel was stolen off your car or getting robbed because you dress nice for work and look like you have money. You spend $850 per month to get a place upstairs in an older couples house, but it’s a good deal because it includes utilities. You are further from work now and decide to spend $79 per month on a reliable Focus lease for transportation, until you learn that Geico will insure your 19 year old recklessness for only $1100/month. So instead you get a loan for a used 2003 Focus and have car payments of $175 per month and insurance of $208. You get a cell phone for $29.95 per month so you can be called for overtime at a moments notice. You skip the health insurance because you job doesn’t offer it and $400 per month is nuts, and you are young so you just take your chances. You are frugal so like the poverty person above you budget $216 ($50.00/week) per month for gas, food, clothes, etc. Your total expenses are $1479 per month and you budget an additional $250 per month for retirement which you stick in a Roth IRA, because the TMF calculator tells you that if you save $250 per month at 8% you will have one million dollars to retire on age 60. You skip the expense of TMF newsletters, and invest yourself in SPY because you do not want to waste money on a PC and internet connection. Each month you check that your employer has deposited the money into your Fidelity account.
There you were, eighteen, young and strong, right out of HS in 2005 earning $24,000 a year and on your way to being a millionaire. Somehow you figured out this plan in spite of “not being college material” as they said. And you kept at it even though things did not always go as smoothly as you budgeted. Remember that first year when you missed six retirement deposits because that used Focus transmission blew up, and how you made it up later with money from your raises? And then when your boss laid you off and you had to start over at a beginner’s salary with a new company. That was a tough day, but at only twenty one years old you still had time It had been a surprise to learn that inflation of 4% added $830 to your expenses that first year, and your first $1040/year raise only paid back one month of the six missed retirement deposits. Over time you got more raises and better jobs, but inflation kept eating away at you. Twenty six years later you were earning $65000 but you were still behind on getting to that million. Somehow your expected expenses had risen 4% annually to $55,000 but you still had surprise bills and were still trying to make up for earlier misses and eight% interest you could never recoup. Finally at age sixty in the year 2065, you reached your million and you could finally retire after living frugally, barely above poverty, for forty two years. You had never had kids, never wasted money on an engagement ring or dating, never taken a vacation or driven a sports car. You had never bought life insurance or healthcare. You had cooked your own meals, and walked to the beach. You had been lucky, you never got injured, never got sick and never missed work through any fault of your own and now you were done. You decided that you would live until you were eighty and enjoy twenty years of retirement. You divided your one million retirement fund into twenty equal $50,000 piles.
Four percent inflation had raised the poverty level to $54,000.
It all seems pretty grim.
According the US Census in 2005 the National College graduation rate is 25.9%. “With commencement ceremonies approaching, college seniors in this country should feel confident of their economic future” Census Bureau Director Louis Kincannon said. “College graduates may expect to earn, on average, nearly $2.1million dollars in their lifetimes. That is nearly twice as much as those have only high school diplomas.” C.M. Russell, over at Secrets of the Job Hunt, was kind enough to share some starting salaries, by major, of college graduates from the 2006 graduating classes. His information is from membership-based naceweb.org:
$56,269 Chemical Engineering $53,096 ComputerEngineering $53,500 Electrical Engineering $50,744 Computer Science $51,808 Mechanical Engineering $47,182 Information Science
$45,391 Management Information Systems $44,928 Accounting $41,115 Business Administration $37,191 Marketing $32,870 Liberal Arts $30,369 Psychology
(74% get poverty.)