Retire comfortably saving money one day at a time

Posted on July 18, 2007
Filed Under Money |

Money bagI wrote before explaining how one can retire rich if he/she starts investing early in his/her life. Most people complain that even though the idea of starting to invest early sounds good, in practice, it is hard to find the money for this month after month. What most people don’t realize is that the money they need they already have but they keep wasting it on daily indulgences.

Here is an example. I, just like many people in North America, like to make a daily trip to my local Starbucks (or any other similar coffee shop chain) and purchase a coffee and a muffin. The total cost for this is an incredible $3.75 CAD. I say “incredible” because these products are highly overpriced but let us not worry about that for now. I make this trip daily, 5 times a week from Monday to Friday. In total, I spend $18.75 every week. Multiply this by the number of weeks in a year, 52, and the amount of money I spend at Starbucks every year is an amazing $975! That’s a lot of money.

Coffee cupIf you invest these moneys wisely for 40 years (starting at the age of 25 and retiring at the age of 65) and if you assume a modest return of 8%, you will have almost $233,000 waiting for you upon retirement. That’s almost one quarter million dollars from not spending money on coffee and muffins!

Did you ever think of this before? Probably not because if you had then you won’t be rushing to buy coffee every day; then again, I made the same mistake for years until I actually decided to compute the cost of my daily caffeine and sugar habit.

Now, if you figure out ways to trim a few dollars every month from other parts of your budget then you can do even better than this. For example, maybe you can purchase a cellphone plan with fewer minutes and tell your friends to call you at home when possible. If you are renting, then try to find an apartment that has lower rent than you are currently paying; saving even $50 per month can grow enormously over the long term. If you are a smoker, then stop smoking. If you own a car then consider getting rid of it and start using public transportation; if you really need a car every now and then, it is wiser to just rent one for a few days. If you think hard about it, I bet that you will find many different ways to save 100-200 dollars per month and at the end of the day, that’s all that matters when it comes to retiring rich.

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