Do you love a stop at the coffee shop on the way to work every morning? Or maybe you like to go out for lunch every day during your break? It may only feel like a few dollars here and there, but “inexpensive” habits add up quickly.
What costs you a few dollars per day could wind up costing tens or even hundreds of thousands of dollars over your lifetime. Here’s a look at how the numbers add up and why you may want to turn those spending habits into saving habits.
Let’s say you buy a coffee every weekday for $3. That’s $15 per week. But over 50 weeks per year (assuming you take a day off here and there), that’s $750 per year in spending. Depending on where you live, that could be a month of rent or mortgage payment!
Maybe you like to go out to lunch every day rather than packing a lunch. If you spend $7 per day on average, that’s $35 per week or about $1,750 per year. That’s a lot of groceries and more. This is money you’re spending little by little, often without realizing how much you’re spending in total.
We assume you kept the cash in a checking account in the examples above rather than spending on those costly habits. But what if you were to put the money in a savings account with interest or invest it in a retirement account?
If you put $60 per month, as much as $3 per day on coffee, into a savings account with an interest rate of 0.5% for five years, you would have $3,645 after five years. That’s a good-sized down payment for a car. If you follow that habit for ten years, you will save $7,381. If you save more, you could be on track for a down payment on a home!
While investing in the stock market comes with risks, it’s usually the right choice for long-term goals like retirement. If you don’t think you have enough money to save for your golden years, consider cutting a subscription you don’t use. Maybe there’s room to cut back on an expensive unlimited data plan for your cell phone.
Setting aside just $5 per weekday turns into about $100 per month. Over the last few decades, the S&P 500 averaged around 10% in annual returns, but we will assume a lower 7% for this example.
Investing that $100 per month for five years at 7%, you will have $7,159. If you keep it up for an entire decade, you’ll have $17,307. After 20 years, you would have $52,092. And after 30 years, that $100 per month would total $121,997.
For less than the cost of a daily sandwich, you could have a six-figure investment account when you’re ready to retire. This of course depends on your investment results and the number of years you have to invest.
When you work hard for your money, it’s important to stick to a budget to prevent unnecessary spending. When you set aside money for specific uses, like coffee, nights out, concerts, or vacations, you might find that it’s worth the effort.
Use a budget to know how much money you have for all parts of your life. Budget for needs, wants, and long-term savings goals. Need help getting started? Try our free savings tools in the Payactiv app! Set money aside each month for specific goals and turn those lattes into a whole “lotta” money.
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