One question I often ask is: “Would you say you spend at least a 1,000 dollars a year on things like grabbing a sandwich, cup of coffee, a snack etc?” and the answer is most often: “No Way!” Then I start talking about other things to get off the subject and will ask at a later time in the conversation: “Would you say you spend about 5 dollars on work days to grab a coffee, lunch out, snacks etc?” and the answer is usually: “Oh, yeah, easily!”
Well, let’s do a little math here. Let’s say you work 5 days a week and you spend 5 dollars each work day. Since most people have some vacation let’s use 50 weeks for our math example. 5 dollars per day x 5 days = 25 dollars a week. 25 dollars x 50 weeks = 1,250 dollars. Wow! That 5 dollars becomes a whopping 1,250 dollars! But it’s only 5 dollars, right?
Keeping track of where every single dollar goes makes for an eye opening experiment. It’s that bag of chips, ice cream, latte, movie and so on that ends up being a lot of money. We often look at it as insignificant because the dollar amount is so small. However, when we learn what those insignificant amounts can end up becoming we start realizing that we need to change our habits, especially if we are short money each month. I started tracking every dollar many years ago and was shocked at how much money I spent at the grocery store. Once I started tracking each receipt and tried to keep it within a set budget I had to choose wisely. Vegetables or ice cream? Yes, you need to have some fun too but I became more aware of the needs vs. the wants. I stopped drinking that daily latte’ as well. It’s only 4 dollars a day but save that money for a year and it becomes 1,460 dollars. Skip that daily latte for 5 years = 7,300 dollars! 10 years = 14,600 dollars. I think you are starting to see the picture. Does that mean we have to stop living and not have any fun? No, I still have a latte here and there, but not daily. And, I only spend money on the wants when I know I can afford to and are within my budget.
So let’s step this game up a notch! If you take out a 200,000 dollar mortgage at 4% for 30 years and apply that 1,460 dollars you are saving from not drinking latte’s (remember, this is only 4 dollars a day) and applying that to your mortgage monthly (121.66/mo) you will save over 31,000 dollars in interest and pay off your loan almost 6 years earlier. That’s 6 years of not paying a mortgage and you save over 31,000 dollars in interest. If you save 8 dollars a day, you would save over 51,000 dollars in interest and pay off your loan almost 10 years earlier! How would it feel not to have a mortgage for 10 years because you saved 8 dollars a day? I don’t know about you but that sounds pretty darn sweet to me.
There are so many great things you can do once you become aware of where your dollar bills are going. You may want to pay off a car loan earlier, a credit card bill or student loan, save up for a vacation or other. Remember, the power of small streams when brought together becomes a raging river. Enjoy building your raging river!