OK, so the book I’m reading is the hyperpositive “Start Late, Finish Rich: A No-fail Plan for Achieving Financial Freedom at Any Age” by David Bach.
As mentioned previously, rule #1 was “Don’t beat yourself up about what you don’t understand about money or about not having started sooner. Let’s move on to what you can do now.”
Rule #2 is finding out where you have more than you actually do but just forgot about it because you choose to use it on little things here and there. He talks about what kind of money you could be making just by putting away an extra $5 or $10 a day. For example, the table below (from p. 39) shows a forecast using a 10% annual rate of return on investment (which is more than you’d make by putting it into a savings account and less than you’d make by putting it into a mutual fund):
|Daily Investment||Monthly Investment||10 Years||20 Years||30 Years||40 Years|
It’s got me reaching for the $1 cookie instead of the $2 pastry. And making myself a bowl of yogurt with slighted defrosted frozen berries rather than picking up a smoothie. Or making myself a “2/3 rule” for indulgent purchases like clothes and song downloads: whatever I was going to buy, buy 2/3 of that, and then if next week I’m still pining for it, then go back and buy it.
It’s kinda like learning to take the stairs instead of the elevator in order to get in shape. Pretty soon, the stairs are no problem, so you actually start going up and extra flight and back down just for the bite-sized challenge of it. Most of us can find $5 a day somewhere. Order a small latte instead of a tall if you can’t skip the trip to the coffee shop altogether. Fill your bottle up with tap water rather than Evian. If you smoke or drink alcohol regularly, you could really be in for some profit. I had a friend in Computer Science graduate school who quit smoking. He wrote himself a little program that took the cost of the number of cigarettes that he usually smoked in a day and then kept a counter running as the days passed. Every time he logged in, he was greeted with the message “Congratulations! You’ve already saved $xyz dollars by not smoking.” Now, that was a motivator.
The question I’m trying to keep in mind when I make small, regular purchases is to ask myself, “Can I live with the disappointment of not buying this or of buying the other thing which would do but isn’t exactly what I wanted?”
Maybe I’ll motivate myself by adding my daily spending reduction decisions to my blog. (I’m sure it will bore the crap out of you, sorry, but it will keep me honest and keep my momentum going.)