The daily run to Starbucks. Eating out for lunch on most workdays. That extra drink over dinner. Going to the movies a few times per month. All of these may be some of the simple little joys that are part of your regular life. And, maybe you have others…nothing too harmless, mind you; but, add up the actual cost of these little things, and you may come up with a pretty big number by year’s end.
What if you could sacrifice a little here and there, and cut back on some of those things? Do you think there’s a way you could save $50 per month, just by making a few adjustments in your spending? For most of us, probably so. And it might not even be that hard to pull off. What if you could put that money (you’re now not spending) into your company retirement plan or IRA? You’d be surprised at how much impact it would make over time.
But first, here are a few other examples to consider:
-Drink water when you eat out. Ordering drinks, even tea or soft drinks at most restaurants will cost you about $3 per drink. Water is usually free. For a family of four eating out 4 times a month, substituting water for other drinks, that’s 4 x 4 x $3=$48. Practically $50 right there!
-Bring your lunch to work a couple of times a week. Eating out isn’t cheap. The average lunch will probably run between $8 and $12. If you’re eating out every day, that could easily add up to $50 per week….$200 per month. Cutting out 2 of those meals per week by brown bagging it could save you between $64 and $96 per month.
The point is, with a little sacrifice now, your “future self” could be looking back and thanking you sometime down the road. So, let’s see how those spending cuts could be put to work in your retirement plan:
A 30 year-old with a zero balance in their 401(k), putting in $50/month could turn into a $100,000 balance by the time they reach full Social Security retirement age of 67 (assuming a 7% annual return). If their company has a 50% match, that would move the balance up to nearly $150,000. Not too bad for cutting back a little.
Of course, everyone’s situation is different. I encourage you to check out your own numbers, and what the impact of a small change could be, by using the retirement calculator that your 401(k) provider makes available online. Or, search out your own tool on Google. You may be surprised what a little change in your contribution rate could mean before you retire. And, if your company has match, and you’re not maxing that match, try to do so, because it will multiply the effect of your change.
Your 80-year old self will likely one day say, “Thanks for doing that.”
