18 June 2007

Drink water, save $46,000

The "latte factor" has been well documented in personal finance circles, but I thought I'd bring you another example of the effect . . . this time revolving around dinner beverages.

Suppose you are 25 and going out to eat, though expensive in itself, is something that you like to do and don't want to give up in order to be more frugal. Suppose also that you go out to eat once a week (we go out more frequently than this, unfortunately). How often do you order a soft drink, tea, or other beverage? For many people, this is just part of their meal. They get a Coke or a tea or some other favorite fountain drink. How much is this costing them?

Let's assume the drink is $2, which is on the low side for a sit-down restaurant. Ordering water instead will save you $2 per meal, once a week. Starting on your 25th birthday, you save this $2 every week, and at the end of the year, invest it in an index fund. Over the next 40 years, your money ($104 each year) grows at 10% annually. How much of a difference does this make to your retirement fund?

$46,029.

Wow! Opting for water instead of a soft drink can add more then $46,000 to your retirement fund.

Let's play with this a little more. Suppose you're a beer drinker, and at your weekly dinner you usually order 2 beers instead of a soft drink or water. Most places, a beer will cost you $3 or somewhere north of there. Let's assume $3, for a total of $6 per week. How much would the practice of ordering water instead add to your retirement fund at 65?

$138,089.

What if you like fancier beers @ $4 a pop?

$184,119.

What if you like to get a couple of glasses of wine instead-- nothing fancy, just a house wine-- at a rate of $6/glass?

$276,178.

More than a quarter of a million dollars for 2 glasses of cheap wine per week.

To me this illustrates 2 very important points. One is the power of compounding . . . you're putting in just $624 per year from your wine savings ($24,960 total), and when you hit 65 it's worth $276,178.

The second is how much of an impact your small spending/saving/investing decisions make. $2, $6, $8, or $12 may seem like very little compared to your salary or your portfolio value, but over time, I think we can all agree . . . $46k, $138k, $184, $276k . . . not small potatoes.

I'm guilty of straying from this pretty frequently . . . particularly for beer. But I try hard to avoid it, since beer in the store is SO MUCH CHEAPER than beer in a restaurant. I try to drink water with my meal, then go home and have a couple of beers at less than $1/bottle. Seeing the impact of decisions like this on my financial goals is a bit of an eye opener . . . one that you know is true, but when you see it in print, really smacks you in the face. Also keep this in mind-- if you like more expensive drinks or drink more of them, or if you go out to eat more than once per week, the magnitude of your decision is even greater.

So give it a shot. Start drinking water and earmark your savings for deposit in your Roth IRA. Your retirement will thank you!

14 comments:

Finance said...

I found this to be an excellent resource. The information is not only good, the blog was easy to read and understand and the best part is the advice works.
I've never had a great deal of success cold calling but haven't found other methods that I could afford to implement and that worked. Read my blog http://www.bookfinance.com/

Anonymous said...

body building revealed -
burthefat -
burn the fat -
carb rotation diet -
cheat your way thin -
cold sore freedom in 3 days -
conversationalhypnosis -
conversational hypnosis -
convert 2 ev -
cure for bruxism -
cure hemorrhoids -
digi cam cash -
digital media solution -
dl guard -
driver checker -
earth4energy -
earth 4 energy -
easy backup wizard -
easy member pro -
easy tv soft -
eatstopeat -
eat stop eat -
error fix -
error killer -
evidence nuker -
fap turbo -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final uninstaller -
fitnessmodelprogram -
fitness model program -
flatten your abs -

Anonymous said...

gamers testing ground -
gov auction -
governmentregistry -
government registry -
gov records -
herbal hair solution -
homebre ware -
home job group -
homemadeenergy -
home made energy -
inteli gator -
joanas world -
joyful tomato -
kidney stone remedy -
learn digital photography now -
learn elements now -
linden method -
lose man boobs -
malware removal bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
muscle gaining secrets -
muscle gain truth -
niche adsense themes -
ninety day powerseller -
pc optimizer pro -
pregnancy miracle -
pregnancy without pounds -
privacy control -
publicrecordspro -
public records pro -
quit smoking today -
reg genie -

Anonymous said...

registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
retrievea lover -
reverse mobile -
richard mackenzie direct -
rocket italian -
save my marriage today -
secrets book -
seo elite -
spyware cease -
spyware remover -
spy zooka -
stock assault -
talking to toddlers -
the action machine -
thebadbreathreport -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the rich jerk -
tonsil stones remedies -
top secret fat loss secret -
turbo cash generator -
turbulence training -
twitter online system -
uncle sams money -
underground hypnosis -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
water 4 gas -

Anonymous said...

wedding speech 4u -
wp goldmine -
wrap candy -
xsite pro -
zygor guides -
37 days to clean credit -
advanced defrag -
adware alert -
adware bot -
affiliate prophet -
affiliate video brander -
anti spyware -
art of approaching -
atomic blogging -
auction classified cash -
automated cash formula -
bbq book -
bloggers pay check -
blogging in action -
body building revealed -
burnthefat -
burn the fat -
carb rotation diet -
cheat your way thin -
chopper tattoo -
cleanup the profits -
cold sore freedom in 3 days -
commission blueprint -
conversationalhypnosis -
conversational hypnosis -
cure for bruxism -
declutter fast -
driver checker -
earth4energy -

Anonymous said...

earth 4 energy -
easy member pro -
easy tv soft -
eatstopeat -
eat stop eat -
fap turbo -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
final sync -
final uninstaller -
fitness model program -
fit yummy yummy -
flatten your abs -
forex ambush -
governmentregistry -
government registry -
healthy urban kitchen -
homebrew installer -
homemadeenergy -
home made energy -
instant article wizard -
jamo rama -
joyful tomato -
lose man boobs -
lower body make over -
maternityacupressure -
maternity acupressure -
maverick money makers -
meet your sweet -
muscle gaining secrets -
muscle gain truth -
natural cancer treatments -
niche review templates -

Anonymous said...

nyhms warcraft guides -
pappa pc -
pc booster -
pc optimizer pro -
pc secret formula -
pda flix -
privacy control -
publicrecordspro -
public records pro -
push button ecover -
reg defense -
reg genie -
registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
reverse mobile -
richard mackenzie direct -
rocket japanese -
rotator cuff training -
save my marriage today -
secrets book -
silent sales machine -
silver lotto -
spyware cease -
super affiliate handbook -
the 11 forgotten laws -
thebadbreathreport -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the power pause -
tmj help -

Anonymous said...

tonsil stones remedies -
top secret fat loss secret -
turbulence training -
twitter rockstar -
uncle sams money -
underground hypnosis -
vincedelmontefitness -
vince del monte fitness -
warcraft millionaire -
warcraft wealth -
warp speed fat loss -
webcomp analyst -
wedding speech 4u -
win back love -
your software website -
zox pro -
zygor guides -
500 love making tips -
acid alkaline diet -
acne no more -
advanced defrag -
adware alert -
adware bot -
affiliate elite -
anti spyware -
anti spyware bot -
article bully -
art of approaching -
auto pilot profits -
bbq book -
blogging in action -
body building revealed -
burnthefat -
burn the fat -

Anonymous said...

carb rotation diet -
chopper tattoo -
conversationalhypnosis -
conversational hypnosis -
cure for tinnitus -
debt free in three -
driver checker -
duplicate file cleaner -
earth4energy -
earth 4 energy -
easy member pro -
easy tv soft -
eatstopeat -
eat stop eat -
end your tinnitus -
fap winner -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final sync -
final uninstaller -
firewall gold -
fitness model program -
fit yummy yummy -
flatten your abs -
forex auto money -
forex auto pilot -
forex confidante -
game tester guide -
governmentregistry -
government registry -
healthy urban kitchen -
higher faster sports -
homebrew installer -

Anonymous said...

homemadeenergy -
home made energy -
i am big brother -
instant profit machine -
i want a teaching job -
joyful tomato -
lose man boobs -
lower body make over -
macro virus -
magic of making up -
make money taking surveys -
malware bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
moles warts removal -
money siphon system -
muscle gaining secrets -
my airfare secrets -
my miracle loans -
my out of control teen -
natural cancer treatments -
ovarian cyst cures -
pc optimizer pro -
piano for all -
prevent sweating -
privacy control -
publicrecordspro -
public records pro -
pvp bible -
quick article pro -
quit smoking today -
reg defense -
reg genie -

Anonymous said...

registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
reg tool -
relationship headquarters -
reverse mobile -
richard mackenzie direct -
rocket japanese -
rotator cuff training -
satellite tv pc master -
secrets book -
spy no more -
spyware cease -
survey scout -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the guru assassin -
the power pause -
tmj help -
tonsil stones remedies -
turbulence training -
two minute profits -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
web traffic machines -
wedding speech 4u -
wind plans -
xp repair pro -
your fun business -
zygor guides -

Anonymous said...

500 love making tips -
acid alkaline diet -
acne no more -
advanced defrag -
anti spyware bot -
art of approaching -
banish tinnitus -
beat eczema -
blood pressure normalized -
burnthefat -
burn the fat -
conversationalhypnosis -
conversational hypnosis -
cpa arbitrage -
creative date ideas -
debt free in three -
digital background -
dirty talking guide -
discus fish secrets -
duplicate file cleaner -
dw insider -
earth4energy -
earth 4 energy -
easy tv soft -
easy web video -
eatstopeat -
eat stop eat -
end your tinnitus -
error doctor -
evidence smart -
fap winner -
fat burning furnace -
fat loss 4 idiots -
final sync -

Anonymous said...

final uninstaller -
firewall gold -
fitness model program -
fit over 40 -
fit yummy yummy -
flatten your abs -
forex auto pilot -
gain opinion -
gold secrets -
government records -
governmentregistry -
government registry -
green diy energy -
healthy urban kitchen -
highest pay surveys -
holo think -
homemadeenergy -
home made energy -
i want a teaching job -
joyful tomato -
keyword elite -
learn photoshop videos -
lmt forex formula -
lower body make over -
macro virus -
malware bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
microcap millionaires -
moles warts removal -
money siphon system -
muscle gaining secrets -
my list strategy -

Anonymous said...

Heу! Do you κnow іf they makе аny plugins to safeguaгd against hacκers?
I'm kinda paranoid about losing everything I'vе wогκed hard on.
Any suggestiоns? raspberry ketone side effects - raspberry ketones
- raspberry ketones