So a couple weeks ago, I wrote a blog post, My Laziness cost me $20K. And it got me thinking about how often do we let these types of opportunities slip by. Are you making a $20K mistake and not even know it? (I dunno, so you better read it..bahah.)
Sometimes we might fight off the urge to buy new shoes, new Target home décor, or another Alexa, which is good. Don’t buy stuff you don’t need, which ugh, can be hard. But if we are saving so we can buy a new Macbook, a new couch, or a new car, then what is the point?
You are saving to spend elsewhere, so the money is gone regardless.
Yes, I get that you need to buy stuff, we can’t all be minimalists. Because dude, what is up with them. But I guess we should aim to find balance so we aren’t always shelling out our pockets for something new and shiny. Your latest purchase might be cool for now, but eventually your couch will suck and you will want a new car. So the cycle continues.
But what if you started a new cycle. Instead of saving up to buy some other stuff, you are saving up so you can invest in your retirement. So that old, future, crusty, funemloyment you will have more moolah to spend when you need it most!
What if you took a look at your spending habits now, budgeted, and then plunked it in your 401k or investments. What would that look like?
Well let’s see:
If you decide, I am no longer going to be spending $40 every 2 weeks on my manicures, it would save you $80 per week or $4,160 per year. But if you invested $40 per week for 30 years in something that averaged 8% return, that is equal to $130K!
If you decide, I will get the cheaper car that saves me $100 a month on car payments and $50 per month on gas, that is saving you $150 per month or $1800 per year. And if you invested it in something that averaged an 8% annual return, that is equal to $11K in 5 Years. So yeah $11K could get you a sweet vacation, a new phone and lots of brunch, but what if you…. (drum roll) … left your 11K in your investments. Even if you didn’t add another penny to it, in 25 years at 8% you would have an extra $81K towards retirement.
Dude, if you decide, I am going to drink one less drink each time I go out for happy hour, dinner or out partying, how much does that actually add up to. Think about how often you go out, and how much a single drink is, and how much you drink. If you went to just one dinner and one bar per week, and saved $10 per drink (averaging beers and cocktails), that is $20 per week, $1040 per year. If you invested that money like a boss every year for 30 years, then that is $130K. WTF are you doing with your life right now.
Compound interest is a beautiful beautiful thing. If you want a calculator help you calculate these amounts for you!, check out the Free Downloads and get the Opportunity Cost Calculator from the post, Why you should think about Opportunity Cost. You can recalculate these amounts at 6.5%, 10%, or whatever you want by updating #3, Annual Return.
If you want to get your financial shit in order, check out Basic B* Financial Plan and download the excel document to help you with that.
If you want to learn more, but don’t know where to start, Start Here.