Use Your $1.5 Million Wisely

Whaling played an enormous role in American life for almost 200 years. Over two thirds of the world’s 900 whaling ships sailed from American ports and making many East Coast ports rich including New Bedford, Massachusetts and Nantucket. Whale oil lit American homes and streets. Baleen helped shape American culture from umbrellas and buggy whips to corsets. Industries grew including ship building, coppering, sail making, blacksmithing and more. And fortunately for the whales, petroleum oil was discovered in Titusville, Pennsylvania in 1859.

It was also a tough and dangerous life for whalemen. The great ships roamed the Atlantic and Pacific seas. “Thar she blows!” The crews manned their 25-foot whale boats, gave chase with harpoons and lances, and towed their prize back to the ship for butchering and processing. And the process continued until the ships were full.

Ships needed supplies to feed, water and mend her crew and replace lost gear. A voyage would last up to four years. And a well-supplied and captained crew went a long ways to making for a successful trip and avoiding mutiny.

We too need to be well stocked for our financial voyages. The challenge is to support a 30-year retirement with a 40-year career. Headwinds commonly include longevity, inflation, the occasional market correction, health setbacks, raising a family, and others. And accelerants may include “windfalls” such as side gigs, entrepreneurial successes, and inheritances. So here are two related thoughts.

Lifetime earnings versus spending – Some people say “You can always earn more income, but you never get more time” encouraging reckless financial behavior such as living for today and not planning for the future. However, lifetime earnings are generally fixed and most people have 40 years to accumulate (age 25 to 65). (Some people have much greater flexibility in earning power… just humor me for this example). Ignoring inflation for a moment, Average Joe earns $35,000 a year, or $1.4 million over 40 years. The average college graduate earns $46,000, or $1.8 million lifetime. $70,000 a year is $2.8 million lifetime. And $200,000 a year is $3.6 million lifetime. So whether its $1.4 million, or $3.6 or whatever, that’s it… that’s all we have to work with. Use it wisely. Consider that the average “close to retirement” family has $163,000 in savings (Economic Policy Institute) – that’s only 13% of Average Joe’s lifetime savings (not a good saver and/or investor).

However, consider your lifetime spending for 60 years from age 25 to 85. First, you have significant control over it. And second, it generally exceeds your lifetime income. But don’t panic. Planning helps fill the “gap” by pension benefits (Social Security) and savings (401k, rentals, etc.).  It helps define your required savings rate.

Starting or shifting careers – Congratulations to you graduates. Some are planning to attend college in the fall. However, not everyone is meant for (or needs) a four year degree. And for those I encourage trade school to provide you greater career opportunities. First, there are many good paying jobs available. One example is our housing market where the demand for new homes exceeds new housing starts – slow permits are one issue, and another is the lack of skilled construction workers. Second, some skilled jobs pay more than college graduates. Go to and search the highest growth job areas and median salaries –medical assistant $32k, electrician $53k, computer system analyst $87k, software designer $100k, heavy truck driver $41k, RN $68k, sales reps (excluding technical) $57k. Third, trade school is often less expensive than four year college ($98k for moderate in-state and $197k for moderate private per College Board).

About Brian Loy

Brian Loy writes insightful and inspiring articles about the ever-changing world of personal finance and the global trends that affect the risk and return on investments and shape the financial- and retirement-planning process.
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