Friday, September 6, 2013

Go Small to Get Big



Small steps x lots of time = big results.

Like training for a marathon, the actual race (the end result) is the fun part, getting there is tough and takes baby steps. You might start out running 2 miles the first time and work your way up to running more. At first the 2 miles will seem like it’s gonna kill you, it’s not. After a few years 2 miles will seem like nothing and your weekly long run could be 20 miles. When you were just starting out the 2 miles was tiring and you felt like quitting. You never thought you’d get to the point where you could run 20 miles.

It’s the same thing when dealing with money. You might think that skipping going out to lunch and saving $10 isn’t going to help. But do that every day and over time magic happens.

What would happen if you stopped going out to lunch daily or gave up the cigarettes or stopped drinking? Besides the obvious health benefits, the financial ones are awesome.

Let’s look at some numbers:

By discontinuing eating out during the work week and investing the money: after 10 years you’d have $36,000 and after 40 years you’d have $698,000. I’m assuming $10 a day, 5 days a week and an 8% return in a no-load stock index fund.

Give up that 6-pack of daily beer: after 10 years you’d have $38,000 and after 40 years you’d have $735,000. I’m assuming $7 a day, 365 days a year and an 8% return in a no-load stock index fund.

Quit that 2 pack a day smoke habit: after 10 years you’d have $65,000 and after 40 years you’d have $1,255,000. I’m assuming $12 a day, 365 days a year and an 8% return in a no-load stock index fund.

So give up the smokes or beer or eating out. Or whatever your equivalent is. Find something that you waste $10-$12 a day on and stop doing it. But don't just waste the money you save on something else, invest it. Stick it in a no-load stock index fund and watch it grow over time at an 8-10% rate.
Heck if you do all 3 and quit all 3, you will be rolling in the dough in the future. 


 
***all posts apply to my family only - your results will be different***

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