$6000! Save Your Hard Earned Money

Save Your MoneyJul 02, 2013: We have all heard the saying "Tiny drops of water make an ocean". Over years, life has taught us that tiny savings can go a long way in making us wealthy. Many of our friends say that small daily expenses do not matter as long as we are earning a lot of money.

But we have always felt that high salaries are only one side of the story. The main issue that makes a difference on how early we retire is how much we are able to save every month. And often the next step comprises of investing our savings in a careful and knowledgeable way to create a healthy nest egg.

We provide a small example of how often "little" expenses which are overlooked add up. This exercise has served us in good stead to cut down many of our unnecessary expenses thereby freeing the flow of funds towards our nest egg.

ItemPrice $FrequencyAnnual Cost $
Snacks$31 / week$156
1 bag of potato chips$21 / week$104
1 litre soda$11 / day$365
1 gourmet coffee$31 / day$1095
Pizza + Tip$181 / week$936
1-6 pack soda$21 / week$104
Lunch$10 / 2 persons5 days / week$2600
Eating Out (Family of 2)$251 / week$1300
Total - - $6660

When we did this exercise we were shocked to see that more than $6000 of our hard earned money could have been saved! This is just the tip of the iceberg. A look at its long term impact on our nest egg had left us gaping!

Suppose we worked hard and saved the above mentioned $6000 every year. To keep things simple, say:
  • We invested $500 a month which compounded monthly with a modest APY of 4.00%
  • Now we keep investing diligently for the next 20 years after which we shall retire
  • The total amount that would accrue after 20 years is a whopping $183,387!
For our calculations we used one of Bankrate's savings calculators.

This real life scenario demonstrates the power of the simple principle of compounding. The earlier we tap it the faster we can rid ourselves of the 9 to 5 shackle (aka job) and retire early.

We would advocate that you set aside a few minutes and jot down your daily "little" expenses which are often over looked. Then add up the daily sums to reflect the annual figures. Pause for a while, and reflect what you would do if you had that money at the end of one year.

VisualizeNow visualize how you would feel if you paid off a great part of your debt with these savings or started investing seriously towards your nest egg and watch it grow. We know we would feel proud of such achievements! Financial independence is a worthwhile pursuit which frees us to do what our hearts wish for the rest of our lives. In our opinion every soul should follow it in a creative and unique manner which suits them best.

We are looking forward towards hearing your opinions on cutting down little expenses which drain away our savings. Each and every story is unique and we savor them.

Image Source(s): iStockPhoto

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