Ever heard that saying along the lines of: ‘A dollar saved is a dollar earned’? Well, that’s not exactly true. Because a dollar saved can earn you much, much more.
In fact, every $1 you save and invest now can become $12 in 50 years’ time (assuming a 5% interest rate).
Now, that might sound like a long time to wait, but one day you’ll reach retirement.
So the question you need to ask yourself when you spend money is: “What will I be missing out on as a result of spending this dollar?”
Inflation considerations
But what about CPI? You may rightfully ask.
Well, CPI has gone up somewhere around 1.5% to 3% each year, in recent times.
Assuming trends stay somewhere in the ballpark of 2.3%, then $1 in today’s money would be equivalent to about $3 in 50 years’ time.
So you’d still be four times better off if you patiently waited for that $1 to turn into $12.
A quick number crunch
Okay, let’s say when you hit age 23 you save, and then invest, just $20 bucks a day.
Even if you didn’t increase that amount for the rest of your working life (which you likely would), you’d be able to retire at age 65 with more than $1 million worth of investments (assuming a 5% interest rate).
You’d also have your superannuation, which should be in excess of $330,000, plus any property you’ve accumulated along the way.
That’s a stress free retirement right there.
Real life examples
So how can you save $20 a day these days?
Well, print out your latest few bank statements and look through the transactions one by one.
How many of them made you a happier person right now? Probably not a lot.
In fact, if there’s any there that you can’t even remember buying you should highlight them and vow never to buy again.
In the meantime, here’s a few general ideas to help you to hit that $20 per day figure:
Sunday: Prepare and freeze three lunches for the work week ahead instead of takeaway.
Monday: Have a health detox from the weekend and skip meat and drink only water.
Tuesday: Ride or walk to work three times a week instead of catching public transport.
Wednesday: Buy this week’s worth of coffee beans instead of getting takeaway coffees.
Thursday: Don’t go late night shopping. In fact, avoid all unnecessary shopping.
Friday/Saturday: Enjoy the company of your friends at home or in a park instead of a bar.
How we can help further
Saving a dollar is one thing. Knowing how and where to invest it is another.
If you’d like to find out about the more complicated strategies we can put in place, get in touch.
We’d be happy to put together a tailor-made financial plan that can capitalise on your opportunity cost efforts.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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