A couple of friends of mine try to have lunch together once a week (unless we’re meeting clients). Our goal is to eat for less than $2 each. None of us wants to eat a big lunch every day, and on top of that, we can have as much fun with a $1.50 burrito as we do with a $10 trout. My family doesn’t have all the money in the world, and I want our money to go toward things we treasure: special time together. If I save $5 a day five days a week for 52 weeks, that’s $1,300 I can spend on making memories with my family. Very good, huh? Some time ago, we started a conversation that led to more conversations and ultimately to a book called “Make Your Money Count.” I want to share my favorite “Three Little Steps” that came out of those “cheap dates” with my two friends. Perhaps you and your family or some of your friends can experience the same meaningful conversations that we share together.
Small Step #1 – The Perfect Investment
Well, there may not actually be a “perfect” investment, but matching funds are the closest thing I’ve seen. Many companies offer to match the money we put into retirement accounts, and that’s free money! Double your income immediately and it will multiply your savings over time.
Unfortunately, I have met several people who did not take advantage of this incredible opportunity. If your employer offers it, do whatever it takes to get the most you can get. You may not be able to afford the latest i-gadget for your computer every time a new one comes along, but you’ll have something much better: peace of mind knowing your future is looking good!
Small Step #2: Calculate the Real Cost of a Cup of Coffee and a Car
I want to give you a new perspective on the true cost of drinking specialty coffee and driving new cars. In this exercise, let’s assume that the money you save is invested.
Many of us go to coffee shops every day and buy a cup of specialty coffee, lattes, or one of those iced coffee drinks. The cost varies, but let’s say we spend $5 each visit on the drink, an occasional brownie, and a tip for the barrista. Five visits a week at $5 a visit costs $25 a week or about $1200 a year. If you’re 25 years old and you save that money and put it in a mutual fund that grows 10% a year, when you’re 65 you’ll have $531,111. (Connie didn’t believe me when I gave her the total, so she took her pencil and did the math herself. Now she’s convinced!)
Now, let’s say you start leasing a BMW convertible when you’re 25 years old and you pay $400 a month for the lease. That’s $4,800 each year. Now suppose he learns to value his future more than his ride today, so he decides to spend $200 a month on a small Toyota or Honda and invest the rest. By the time you’re 65, that $200 a month at 10% interest will have turned into $1,062,222!
Little Step #3 – Two for One
When Connie and I were poor, we would sometimes go to nice restaurants and buy two meals. We rarely got to eat everything on our plates (well, Connie couldn’t), but we were sure that was the price of eating out. However, somewhere along the way, we realized that the portions were so large that we could easily split a dinner and save a lot of money. For the past 15 years, we rarely ordered two meals. We always have enough to eat, and if we’re still hungry, we go crazy and have dessert.
Some people think that splitting a dinner somehow shortchanges waiters who have to do the same amount of work for half the tip. We solve that by giving a bigger tip, so everyone is happy.
How much have we saved over the years? My estimate is that Connie and I go out to eat three times a week. (Yes, I know it’s a lot). If we save an average of $12 on each meal, that’s $36 a week and $1,872 a year. Over the 15 years, that adds up to over $28,000 (without interest on the money)! If we had paid that much each time, I’m not sure we would have gone out to eat as much, or perhaps gone to restaurants with cheaper meals. Even if we didn’t save that much money, we went to good restaurants, had good meals together, and stayed within our budget. That works for us!
Over time, my wife and I have come to believe that achieving long-term financial goals is easy when we pay attention to the small steps that create future success, significance, and fulfillment. Things don’t always go according to plan, but having a plan makes it much easier to manage the risk of everyday life, recover from the unexpected, and realize our dreams. It works for us and it will work for you too!
