How To Save $25,480.00

Up until about seven years ago, we would eat out 2-3 times a week, on average. You would typically find our family dining out Friday, Saturday and Sunday. Occasionally we would venture out during the week as well. Not only did this have a negative impact on our health, but it had an equally adverse effect on our wallet.

We decided to limit our dining out to once a week. This was extremely difficult at first! We had to spend more time grocery shopping, for instance. Also, we had to cook dinner alot more often! But the rewards have made it worth all of our effort.

The first benefit was to stabilize our weight. In other words, we stopped gaining weight. I believe this has also contributed to our ability to loose weight. Many times when I would eat out, I found it easy to justify in my mind the ordering of entrees that were REALLY bad for me and that I would never cook at home. Menu temptation as I like to refer to it! I have found that it is much easier to control myself at home.

Secondly, and the reason you are probably still reading is the $25,480.00! This is real savings and here is how I got there. As usual, I am going to use very conservative numbers. Our savings are probably much greater.

I am using the following assumptions: Family of four (4), $35.00 per meal and reducing the number of restaurant visits by two (2) per week. So here we go!

The average dinner of $35.00 * 2 per week = $70.00 * 52 weeks in a year = $3640.00.

We have been saving $3640.00 * 7 years = $25,480.00

This just represents the raw savings number, I have not taken investing this savings into consideration, yet.

And now for the retirement run down! We will initially assume an 8% annual average return. This is a very conservative number which can easily be achieved by placing the money in a Total Stock Market Mutual Fund.

THE BIG PAYOFF

$70 per week * 52 weeks / 12 months = $303.33

Invest 303.33 every month for 30 years

At retirement you could have $310,770.00 after paying $74,235.00 in taxes!

If you put it into a traditional IRA you could have $385,005.00 at retirement!

Let’s Take It Up A Notch!

Lets get a little more aggressive and assume the historical 11% stock market return.

$70 per week * 52 weeks / 12 months = $303.33

Invest $303.33 every month for 30 years

At retirement you could have $461,978.00 after paying $133,038.00 in taxes!

If you put it into a traditional IRA you could have $595,016.00 at retirement!

All this from skipping two (2) restaurant meals a week! Small changes in our behavior can and will have a huge payoff. I try to always look at the big picture. I look past the $1.75 for a soda. I figure out that $1.75 * 4 *52 weeks * 10 years = $3640.00! Now there’s some motivation for behavior change!

In Conclusion

I hope this provides some food for thought and gets you motivated to make some life changes! If you have a similar story I would love to hear it!

On A Side Note

Edward Lorenz, father of the chaos theory, died this week. Lorenz was perhaps best known for the butterfly effect in which stated that a butterfly flapping it’s wings on one continent could create a tornado on another continent. Simply put, small variations in behavior can produce huge changes in the long term outcome. So why am I attempting to give you a science lesson, you may be asking yourself? Because, I think this theory holds true in many aspects of our lives. For instance, small behavior changes, such as asking for water in restaurants can equate to $93,474.64 in your retirement kitty. Not bad considering the average drink costs just $1.75! Or, as in my example above, a change in our family eating habits will add up to huge savings over the course of our lifetime. So, the next time you try and convince yourself that saving a little here and there won’t make any difference, think of the butterfly effect! Live long and prosper!

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