Present value. You are currently in the job market. Your dream is to earn a six-figure salary \( (\$ 150,000) \). You hope to accomplish this goal within the next 20 years. In your field, salaries grow a \( 3 \% \) per year. What starting salary do you need to reach this goal? What starting salary do you need to reach this goal? \( \$ \square \) (Round to the nearest cent.)
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To find the starting salary needed to achieve a six-figure dream salary of $150,000 in 20 years with an annual growth rate of 3%, we can use the formula for future value: \[ FV = PV \times (1 + r)^n \] Where: - \( FV \) is the future value ($150,000), - \( PV \) is the present value (your starting salary), - \( r \) is the growth rate (3% or 0.03), - \( n \) is the number of years (20). Rearranging the formula gives us: \[ PV = \frac{FV}{(1 + r)^n} \] Substituting the values, we have: \[ PV = \frac{150,000}{(1 + 0.03)^{20}} = \frac{150,000}{(1.03)^{20}} \] Calculating this gives us: \[ PV \approx \frac{150,000}{1.80611} \approx 83,016.55 \] So, your ideal starting salary needs to be approximately **$83,016.55**. Calculating your ideal starting salary is just the beginning! Consider that your field may also have unique growth trajectories, so staying abreast of industry trends can set you up for even higher earnings. Networking and skill enhancement might grant you raises beyond the typical 3% as well! While aiming for that six-figure salary, remember to avoid the common mistake of not regularly reviewing your career plan. Set benchmarks along the way—like achieving certifications or gaining specific experiences—to ensure you’re on track to hit that financial target in 20 years!
