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As a volunteer tax preparer for lower-income clients, I was surprised how often people came in with a convenience-store snack—a small pack of crackers, a soda, a candy bar. Before my three-hour shift I’d pack a drink and snack at home and take it with me. I don’t mention this to brag, but to point out how much money gets wasted by buying snacks on the go. Combine a few bad money habits—smoking, buying lunch out, playing the lottery—and you’ve likely spent thousands unnecessarily.
A typical convenience-store run might look like this: coffee $2.00, sweet roll $2.00, crackers and cheese $1.25, soda $1.70—total $6.95. The at-home versions could be: coffee $0.50, cereal or donut $0.75, crackers with peanut butter or cheese $0.75, soda from home $0.25—total $2.25. That swap saves $4.70 a day.
Multiply $4.70 by 365 days and that’s $1,715 wasted in a year. Invest $1,715 each year in a stock mutual fund averaging a 7% return; after 20 years that annual investment is worth $70,307. Is a few minutes of planning each day to pack snacks and a lunch worth investing in your future? Jean Chatzky found that 55 percent of the self-made rich credit habitual saving for their financial success.
Stock up on low-cost snacks at the grocery store and keep them in your car or at work. We keep a case of water and cola in the car so we don’t pay $2.00 for a can of soda. If planning feels like too much work, ask yourself whether a little effort now is worth tens of thousands later.
It’s possible to build wealth on an average salary. Start small—buy the snacks you usually grab when you’re out and leave them in the car. Instead of stopping at the snack shop near work, grab a soda or granola bar from your stash. Make coffee at home and bring a thermos. If you must buy coffee sometimes, get it at McDonald’s for about a dollar instead of a pricier coffee shop.
Next, make sure those savings actually get invested. If you don’t already have an account with a discount broker, open one—Charles Schwab, for example, has low minimums. Set up an automatic transfer of $140 a month from your bank to the investment account, and instruct the broker to invest that money each month in a diversified stock index fund.
That’s it—keep the transfers and investments going through market ups and downs, and don’t touch the money. Over time, if history is any guide, your savings should grow.
Caveat: consult your own financial adviser before making any investment decisions. This information is not a recommendation to buy any specific financial product. Charles Schwab is a solid option for small amounts; if you can meet higher minimums, brokers like Fidelity or TD Ameritrade can also get you started.
