A Pop a Day
We all commit our own little splurging here and there. For some, it’s a soda pop from the vending machine, a candy bar here, a water there. Some do it weekly – an unnecessary takeout lunch or purchasing some random item that can be avoided altogether. Most people waste little amounts of money here and there … all the time. I do it, you do it, don’t deny it.
Even if we feel a little guilty inside after purchasing an item we don’t really need (e.g. oops, bought crap), we think or say something like “it all adds up”. One day I decided to figure out just how much “it all adds up” to.
A soda pop purchased every day at the cafeteria costs you $1.09 daily, $5.45 weekly, $22.71 monthly. Learn to drink water instead and invest that money at 8%, and you’ll have around eighty grand by the time you retire.
The present value is basically all future payments brought back to present time. It’s great for bargaining scenarios like “do you want $1,000 a month NOW or $10 million in 40 years?“. All things as they are, you’d be crazy to pass up the $10 mil offer because statistically speaking, you won’t be able to invest your money better than that. Ten mil in 40 years brought back to today results in a series of consecutive payments of about $3,000 per month.
Do we straight up WASTE $50 a month? I’m not talking eating out, etc. I mean, waste, as in, “don’t know where that money went” … I bet we all waste at least that.
… translates into $175k at retirement.
So how much per day would you have to “waste” to retire with a mil?
Turns out, around $14 per business day or $10 per weekday. That figure hovers around the mandatory “save at least 10-20% of your paycheck for retirement”.
So if that’s so easy, why isn’t everyone retiring with a nice nest egg? After all, I’m sure everyone understands that little amounts NOW turn into HUGE amounts in the future …
Skip one pop a month, and have almost four grand by the time you retire.
This is not brain surgery, and everyone understands these simple concepts. Here’s my opinion on why more people don’t retire rich:
- Laziness and complacency. It takes time to set everything up, then learn, follow up, etc.
- Low interactivity and lack of control. Wouldn’t it be nice to go to the cafeteria to buy a Pepsi, and then suddently change your mind, NOT buy the pop and instead move $1.09 from checking to IRA?
So set up some auto-withdrawal thing from every paycheck and stop buying carbonated drinks.
Hah, I love this. Great post and it’s something I really have to adhere by because I definitely know how to waste precious money on bad things.
Dimitry
Comment by Dimitry — October 8, 2006 @ 10:22 am
Did you take into account inflation? $1 mil in 40 years isn’t going to be worth a lot of money :P
Comment by LSD — October 8, 2006 @ 5:25 pm
No, no adjustment for inflation, applicable taxes, etc. This was supposed to put things in perspective. Thanks for comment.
Comment by How To Be Poor — October 8, 2006 @ 5:41 pm
Wow! It’s amazing how much money actually goes through our hands in a lifetime and how much we are wasting on the little things.
Comment by Chelee — October 9, 2006 @ 3:25 pm
[...] A Pop a Day – over at How to Be Poor… kind of puts things in perspective. [...]
Pingback by Building My Empire » Around the Blogosphere — October 10, 2006 @ 10:09 am
“Did you take into account inflation? $1 mil in 40 years isn’t going to be worth a lot of money :P”
I didn’t see any of the amounts characterized as “a lot of money”. The point is would you rather have $1 million in 40 years or $0 million? It’s not about saving $1.09 a day, it’s about a saving mindset that will help you build wealth.
Good Post.
Comment by Special Ed — October 12, 2006 @ 6:02 am
I really like your article. I spend 90 cents on a soda everyday at work. So this really hit home, but my only question is where can invest my money that will guarantee 8% return for so little money a month without $1000 or $500 initial investment???
thanks,
momsbroke
Comment by momsbroke — October 12, 2006 @ 11:00 pm
How to Be Poor,
As your post shows, compounding interest and time creates wealth easily for patient investors. Unfortunately, most people aren’t that patient.
Momsbroke,
If you want to get 8-24% returns on investments as little as $50, see Prosper.com. To note, the risks are higher since one is bidding on unsecured loans. However, to get higher returns generally requires higher risk. Good luck.
Comment by Super Saver — October 14, 2006 @ 6:46 pm
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