Figuring Out How Much You Really Spend

The only way to really find out where you spend your money is to write down everything you spend for three weeks. I say three weeks because it really is true, it takes 21 days to make a habit. At that point you're in the habit of tracking your spending and you're seeing the results immediately, unlike looking at a personal financial app that will give you a view in the past.

Spending $804 A Year At Starbucks

Next, take that spending and multiply it by 17. Why? Because 17 times 3 weeks makes 51 weeks, which is pretty close to a year. That way you'll see how much you spend in a year. It's astonishing. I was giving a workshop in Phoenix and a participant exclaimed they spend $804 a year at Starbucks. I really didn't think that was a lot compared to some people I know, but it is a lot of money for flavored water.

Going Out To Dinner For A Year

So, let's take it a step further. Let's say you and your significant other go out for dinner twice a week at one of those "casual dining" establishments. By the time you've added drinks, tax and tip to the meal, it's gonna cost you at least $25. Twice a week, that's $50, which is about $2,600 a year.

Stepping out on the limb, what will this do to your retirement nest egg? The Dow Jones Industrial Average has increased over 11% a year since 1929. So, if we were to take that $2,600 a year and invest it instead of spending it, and we earned 12%, by the end of 40 years, which is your working lifetime, you would have earned over $2,000,000!!!

Your Budget Costs More Than You Think

The amount of money is simply a raw number. $2,500 really doesn't mean anything. That's the price you pay. The true cost of those meals is the time it takes you to earn the dollars to pay for them; the time you spend at work.

So, think about how long it will take you to bring home the $2,500. Is something fleeting like food really worth all that time?

CategoriesSaving Money