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Tuesday, June 21, 2005

A Dollar Saved is Better Than a Dollar Earned (redux)

Yesterday, I made a reference to a post that showed that a dollar saved is better than a dollar earned. I'd like to elaborate on that theme today and show how "small" savings and changes in lifestyle can make BIG differences over time if invested for the long term.

If you want to see what a small change like giving up expensive coffee can make, here's the "Cheap coffee vs. Starbucks" calculator, compliments of Sound Money. Assume that you give up one $3 latte a day, and go with office coffee instead (actually, that would probably help you kick the habit altogether). Then, assume you invested the money saved in a mutual fund that averaged 10%. After 20 years, you'd have an additional $35,000 (give or take), and after 30 years, you'd have an additional $102,000.

As I tell my class, "if that don't light your fire, your wood's wet".

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