I recently found this article from David Bach on how to save money (primarily for retirement) and really appreciated his insight here:
Learning to save is a lot like running a marathon -- you need to build up to it by training gradually. It's too overwhelming to go from saving nothing to saving $2,700 a month, so you need to start slowly and keep it simple.
Consequently, I asked Harriet if she could save $10 a day. She felt that was totally doable -- I even got her to agree that she could get her husband to save $10 a day. That adds up to be $7,300 a year.
If Harriet paid herself that $7,300 and put it in a solid, diversified investment that earns 10 percent (less than the stock market has averaged since 1926), she would have $461,947 in 20 years
It also turns out that Harriet's employer offers a 401(k) plan that matches 50 percent of what each employee contributes. That $20 a day she saves plus the 50 percent match equals $30 a day, which adds up to $10,950 a year -- which, at a 10 percent annual return for 20 years, would give Harriet a grand total of $692,924.
The point I love about these thoughts is that even if you can only save a little each day, it will add up to a large sum if you do it for years and years. That's why it's sooooooooo important to start saving early -- even if it's only $1 a day -- it will add up to a fortune over time. So if you start at 22 when you get out of school and earn 8% on your investments, here's what you'll have at age 62 at the following savings levels:
- Saving $1 per day turns into $94,556
- Saving $5 per day turns into $472,778
- Saving $10 per day turns into $945,556
- Saving $20 per day turns into $1,891,113
Now for most of us, it's too late to get 40 years of savings (unless we started 20 years ago) but this is certainly a reasonable amount of savings time for your kids. Teach them the power of saving over time and when they hit retirement, they'll thank you again and again.
Saving $10 a day would be a fortune the way I live currently. Most days, I don't spend a dollar more than my necessary expenses (transportation, rent, insurance, etc.)
I guess to some people that would be saving a little, but it really depends how frugal you currently are to begin with.
Posted by: Lazy Man and Money | April 12, 2007 at 09:05 PM
I agree that $10 a day is actually quite a lot of money. But on the other hand anything saved is better than nothing.
Posted by: plonkee | April 13, 2007 at 07:50 AM
Right. Forget the $10. The trick is just to get started and develop a good habit. As you begin to make more money saving becomes as natural as brushing your teeth every morning.
Posted by: Rob D. | April 13, 2007 at 08:51 AM
Okay, what if someone makes 1300 a month and therent is 809.14 a month then what? Everything they try never makes money, not even to solve a case!
Posted by: Anonymous | October 16, 2007 at 12:52 PM
Anonymous: Have you thought of anything that could reduce your rent or increase your income? You could move to somewhere cheaper, or take in roommates.
Posted by: Anitra | October 16, 2007 at 01:12 PM
Dont waste your money on alcohol drink and cig't smoking..SAVE ALOT OF MONEY.
Posted by: | April 22, 2008 at 05:44 AM