With all the articles and opinions on finance I have, you may think that there is some complicated, long way I came about wanting to save and invest more. And sure, my parents did instill a lot of valuable financial ideas, but even then I still made a lot of mistakes. Even now, I still make mistakes, probably going to Chipotle and Panda Express a bit too much (and the occasional Coffee Bean & Tea Leaf or Caribou coffees). But the single thing that puts all that small spending into perspective and keeps me from spending? Compound interest!
I started using an investment calculator online (https://www.calculator.net/investment-calculator.html) to calculate how much I’d need to invest every month to reach various investment goals. But I grew curious: how much would I have by retirement if, instead of buying that $5 coffee that I didn’t need (and my waistline certainly didn’t), I invested it? After 40 years at an 8% average return, that $5 turns into over $100! And then I ask myself: sure, it tastes amazing, but is it worth $500? Heck no! And imagine if I got that same coffee every work day (5 times a week, or roughly $100 a month). If I invested all of that? Over that same time span, I could have over $300,000!! So I thought, maybe it’s time I suck it up and instead drink the crappy coffee at work. And sure, I definitely still spoil myself occasionally, and there’s certainly a lot of more expensive things you can cut to save money instead of food and drinks, but it’s just an easy way to enforce the idea of compound interest.
So in summation, an easy trick I use for purchases ranging from coffee all the way to furniture and beyond is to just calculate out what that price could be if instead of buying something you don’t need, you decided to invest it instead! Of course, don’t cut necessary expenses because of this, but it’s just another way to see the value of money, and more importantly, the value of time!