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Introduction

ECON 320 Engineering Economics

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Are You Rich Yet?

Barron’s, September 20, 1999

A Weekly Financial Magazine

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Beer & Pretzels Rich

Investment assets of $2.02 million

Don’t count your house(s)

About 5% of U.S. individual taxpayers

Annual investment income: $101,141

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Filet Mignon & Champagne Rich A portfolio of $4.55

million 1% of U.S. individual

taxpayers An annual investment

income of $227,546

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Yacht & Limousine Rich

A portfolio of $19.33 million

Annual investment income of $966,621

Who’s Who Y&L Rich: Jack Welch of GE, Mike Armstrong of AT&T

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Really Really Rich

A portfolio of $37.86 million

An annual investment income of $1.9 million

Only 110,672 U.S. taxpayers reported income above $1 million (1996)

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Damn Filthy Rich

A portfolio of $1 billion 267 individuals in U.S.

(1999) Bill Gate: $85 billion Mike Dell: $20 billion Jerry Yang: $3.8 billion Don Trump:$1.6 billion

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Wealth RevolutionSource: Barron’s Online, September 18, 2000

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Your Goal -Beer & Pretzels Rich at the age of 65 Your current age: 20 years old Amount of savings desired: $2 million Interest earned on your savings: 10% Required monthly savings: $987

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Monthly Savings Required(to save $2M at age 65)

Starting Age

Required Monthly Savings at Varying Interest Rates

5% 7% 10% 12% 15%

20 $987 $527 $190 $93 $31

30 $1,760 $1,110 $527 $311 $136

40 $3,358 $2,469 $1,507 $1,064 $617

50 $7,483 $6,310 $4,825 $4,003 $2,998

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Returns from Various Investment Classes

Average Annual Return 1970-1997

Best Year Worst year

U.S. Stocks 13.0% 37.6% (1995)

-26.5% (1974)

International Stocks

12.7% 39.4% (1993)

-26.2% (1974)

Cash Equivalent

6.8% 14.1% (1981)

3.0% (1991)

Real Estate 8.8% 20.5% (1979)

-5.6% (1991)

U.S. Bonds 9.3% 33.5% (1982)

-5.6% (1994)

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What’s the Engineering Degree Worth in 2004?Source: CNN Money, September 21, 2004

Majors Average Starting SalaryChemical Engineering $52,539

Computer Engineering $51,297

Mechanical Engineering $48,578

Industrial Engineering $46,036

Information Science $42,375

Civil Engineering $42,056

For any engineering graduate, it is not difficult to set aside$100 each month from his or her salary.

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Conclusion?

Start saving Early!