It Can Pay To Be Stingy

We all know the importance of saving money. Especially for those unexpected events in our lives or retirement. If a 20 year old were to invest a dollar a day, it could grow to about $500,000 after 50 years, assuming a 10% annual return on investment.

There are more ways to boost a retirement account. By cutting your expense by just a few dollars each day adds up quickly. First, you will need to understand the importance compound interest and boosting the return by one percentage. 1% may not seem like much, but after you have saved a dollar a day for one year, your savings would have grown by an additional $3.65 a year. You might be thinking, why bother, right? Wrong.

If you take your time to take out your calculator, that one percentage difference is a really BIG deal. Instead of a 10% annual return, you can assume that you are now achieving an annual return of 11%. While saving a mere $1 a day, how much will your money become after 50 years? The amount would now be $730,000. That extra 1% return will give you an additional $230,000. Assuming you spend $100,000 each year in retirement, this extra 1% will give you an extra 2 years of comfortable living.

In addition to looking for the best return on your investment, you should be looking for ways to cut unnecessary expenses. By reducing spending and not buying one coffee, snack, finding cheaper parking or taking mass transit, you can add as little as a few dollars each month to your investment to as much as a couple of hundred. Also, investing the pocket change you go home with every month adds up quickly too.

A candy bar each day adds up to more than $750 a year. A cup of coffee can add up to about $1,000 a year. Your pocket change comes to an average of $360 a year. Investing these amounts will make you a millionaire by the time you retire, when combined with your other investments.

Without interest payments, that $360 in pocket change you collect each year will add up to $18,000 over 50 years. With compound interest it turns into more than $20,000. Not bad when you think about it as this is investing without really thinking about it.

It pays to be stingy, saving your money and looking for an extra 1% return on investment. I believe you can save much more and the sooner you start, the better off you will be and the sooner you will reach a million dollars.