This weekend’s little brawl on saving has been interesting to observe. I think the statistics prove my point that MOST Americans are delusional, foolish and stupid regarding how they spend their money. When you call them on it, they have a million and one excuses and rationalizations for why they haven’t saved and are in debt up to their eyeballs. Everyone wastes money on something, sometimes. It is the systematic long term wasting of money that is the difference between those who have accumulated wealth and those who have accumulated debt.
I used bringing my lunch to work as an example. Most people don’t give a 2nd thought to spending $7 per day buying lunch. I estimated that by bringing my lunch from home 9 out of 10 days, I save $1,500 per year. If you have access to an excel spreadsheet you can figure out what that means over the long haul.
After 25 years of saving $1,500 per year by bringing my lunch, I would accumulate:
- $55,000 at a 3% annual return
- $72,000 at a 5% annual return
- $147,000 at a 10% annual return
Another thing that has always stuck in my craw is watching people buy Starbucks coffee everyday. The average cup of coffee at Starbucks costs $2. I like coffee as much as the next guy. We drink it for the caffeine boost. I drink two cups of coffee per day. I buy a large can of Maxwell House or Folgers or whatever for about $7. The can makes about 200 cups of coffee. Every morning I come downstairs, feed the cats, brew a pot of coffee and make my lunch. My cup of coffee costs about 3.5 cents.
If some dude buys two cups of coffee per day at Starbucks and assuming they only do this on weekdays, they will spend approximately $1,000 per year on coffee. I will spend less than $30 if I drink two cups seven days per week. After saving $970 per year for 25 years by brewing my own cups of coffee, I would accumulate:
- $35,000 at a 3% annual return
- $46,000 at a 5% annual return
- $95,000 at a 10% annual return
This is why I have absolutely no sympathy for people in their 50′s who haven’t saved $25,000 in their entire lives. Life is about choices. You can make good choices like getting a good education, working hard, saving and staying out of debt. Or you can live a frivilous, materialistic life, built upon debt. Most Americans have chosen the latter. Little savings add up. Compounding is a fantastic concept when used properly. So enjoy that 98% financed McMansion, the leased BMW, the exotic vacations funded with home equity, and those Starbucks lattes. But don’t come whining to me when you are 65 years old and broke and expect an ounce of sympathy or compassion. I’ll be calling you a dumbass.
Let the rationalizations and excuses begin.