This blog is a way for me to share hard learned lessons about money with those who are just starting out on their own. I hope it's a way for you to avoid making the mistakes I made, and to benefit from my experiences

Tuesday, July 25, 2006

Lesson 8: Find Your Latte Factor

To help you start saving, it is very useful to find something you can cut to boost your savings. For instance, do you go out and buy a latte every day? Maybe a pumpkin seed muffin too? Do you smoke? Do you eat out or get fast food for lunch during the week? Maybe you get your nails or hair done once a week? These are all expenses that you can cut out and take that extra money and start saving.

For me, it's eating out or eating fast food too often. Every work day, I generally eat out for lunch. My usual lunch tab runs between $9 and $13. Also, my family usually buys some sort of fast food for dinner 4 nights a week or so. So what if we trim that back some.

Let's say I eat out for lunch only 2 times a week. That would save me an average of $8 each time. My replacement lunch that I pack myself still costs some money, so that's why only $8. OK so that's $8 x 3 days or $24 a week.

Now let's say my family cuts down the fast food to only 2 nights a week instead of 4. Each fast food bill is generally around $15 to $20. Figure a prepared meal would still cost $8 for us. That's $9 x 2 days = $18 saved each week.

That's $42 a week I could save, and probably eat healthier doing it. Multiply that times 50 weeks, figuring vacations, and that's $2,100 a year my family can save, just by eating in more and probably eating healthier.

$2,100 is a lot of money to save, and remember, that's After-Tax money I'm saving. Let's say I take that $2,100 each year and add it to my and my wife's Roth IRAs every year. Using this savings calculator, if the IRA's earn an average of 8% a year, which is a fairly conservative number, and I've got 20 years until I retire, it amounts to $99,353! And no taxes due on any of it.

Holy Crap!

My fast food habit is costing me $100,000, and extra pounds, and higher cholesterol. You better believe that's going to stop now!

What's Your Latte Factor? How Much is it Costing You?


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