Handling our finances is a difficult at times. It can be hard to save money and build towards the future. The reality is that many of us just aren’t making the right decisions when it comes to money. I decided to use this example to show you the power of saving money as well as the power of compound interest.
If you stopped spending money on these 8 items and instead invested them over a period of 30 years with 6% compounded interest, you would be a millionaire. 6% represents a modest return that can be achieved through smart investing. Any of us can become millionaires with a little bit of diligence and a lot of patience.
The average cup of coffee is about $4. If you took the money you spent on coffee everyday and invested it at 6% your total savings would be: $113,849.53
Let’s use a modest number and say that you spend $200 per month on average eating out at restaurants and fast food joints. If you instead used that money to invest at 6% your total savings would be: $189,749.35
Lets assume you spend $150 per month amount for drinks on weekends. We all know the number can be much higher than that for some. Not only can it be a waste of money, but also it makes you feel like crap the next day! If you used that money to invest, total savings would be: $142,310.48
I know that not all of you smoke, but I decided to add it to help give incentive to those of you who are smokers. Save your money and your life. I’ll use a pack a day smoker for this example. At 7$ per pack your total savings would be: $185,950.60
5. Gym memberships
The majority of gym memberships go unused. I’m all for better health, but if you’re not using your membership maybe you should cancel it until you’re ready to make a commitment. Assuming a $20 monthly membership your total savings would be: $18,979.71
Many of us spend top dollar for name brand clothing. While there’s nothing wrong with looking your best, perhaps you may want to cut back on the shopping excursions. I’ll use a $100 per month amount for this example. Total savings would be: $95,875.57
7. Expensive phones and data plans
Many of us spend up to $100 dollars a month for expensive smart phone plans. If you instead used that money to invest your total savings would be: $95,875.57
8. Brand new cars
Many people continuously lease and take out loan on cars instead of paying cash up front. Let’s say you buy a brand new car that costs you $250 per month to pay off. If instead you used that money to invest your total savings would be: $237,180.30.
Now lets do the math.If you took the money you would normally spend on these common items and invested it your total savings would be nearly $1.1 million.
Of course this is just a hypothetical scenario, but I wanted to show you the power of cutting back on your spending and using that money to invest in your future. Hopefully this helped you gain a better perspective on how to manage your money and plan your financial destiny.