Financial Stalactites - One Drop at a Time

When I was younger I enjoyed spelunking. If you aren't familiar with the term it is the hobby of exploring caves. One of my favorite things to find is a stalactite which is created by the constant dripping of mineral rich water. There are some expenses that I like to compare to stalactites because while they seem small their ever constant dripping adds up over time. Eating out once a day is a good example. Assume you spend $5.00 each day, you work 5 days a week, 48 weeks a year for 40 years. $5.00 x 5 x 48 x 40 = $48,000. Now that may not seem like such a big deal, especially since it happens over 40 years.

Now imagine that same amount of money invested over 40 years making a 5% annual rate of return. Would you care to guess how much money you would have at the end? $164,892.00. Go crazy and dream that you could make a 10% rate of return and you would have $632,907.00.  (For an easy online calculator click here.)

Now if you don't think this applies to you because you don't eat out every day I challenge you to find the financial stalactites in your life? My wife realized that hers was a cell phone. She had an iPhone and by the time we paid for the talk time, texting and data plan it was $43 a month. That breaks down to almost $10 a week which if invested could be from $65,957.00 to $253,163.00. (Stay tuned for a future article about how to save money on cell phone bills.)

As you look for these wealth killers remember that the average person makes over $1,000,000 in their 40 years of working (35,000 per year * 40 years = $1,400,000). The challenge is that the money doesn't get delivered in one lump sum, it trickles in drop by drop. What are you doing with your drops?

Happy Savings,
Jimmy

P.S. Feel free to post your thoughts and comments on the blog.