26 - 2007

Financial quandary: What if you’ve already cut the corners?

Periodically, I see articles like this one, titled “Turn $1 a Day Into $67,815.”

These kinds of tips are inspiring, and I’m fortunate enough to be able to stash away $1 a day (and I think I’ll try to start after reading his final figure there).

But the author’s suggestion is that $1 a day is just the change from your purchases that day. I’ve seen other articles suggesting that the way out of debt is to not spend $5 or $10 a day and instead apply it to your debt or save it.

I feel like I live like a pretty normal bourgeois American, but I don’t spend $5 a day or $10 a day that I could cut out. Sure, some days I do spend that much — but generally, no. I do have a jar where we collect the day’s leftover coins. I get up to about $40 every three months or so. That’s half his minimum level.

The author has some specific suggestions for how to save even more – he projects $123 per month easily. His suggestions are:

  • Take-out vs. dining out once a month – save $45 a month
  • Manicure less often – save $15 a month
  • Fewer trips to car wash – save $12 a month
  • Video rental vs. movie monthly – save $11 a month
  • Regular coffee instead of a cappuccino on weekdays – save $40 a month

The total annual savings of $1,476, he says, could grow to $278,040 in 30 years.

Now that’s just depressing.

  • My dining out bill is usually closer to $35 for our family, so even if we substituted take-out (does this mean something like Chinese? That costs about $16) we would save $19.
  • I never get a manicure. Save $0.
  • I go to the car wash about every three or four months. Don’t think I’d better cut that down. Save $0
  • We might go to a movie once every six weeks or two months. If I cut that out I’d never go. Occasionally we rent a DVD from Redbox for $1. Otherwise we get them for free at the library. Save $0.
  • Regular coffee instead of a cappuccino on weekdays – aha! I do buy a latte, sometimes twice a week. I wouldn’t bother buying regular coffee out. Save $30

My total savings if I completely eliminate coffee out would be $49, not $123. That translates to $588 a year or $105,589 after 30 years.

It’s not so shabby, and likely worth doing. After all, $100k is nothing to shake a stick at. But if you already live relatively bare, cutting out “just a few luxuries” can feel like cutting out everything.

The quandary, then, is: Do you cut out “everything” and save, save, save, or do you throw your hands up and figure you’ll worry tomorrow?

I usually try to strike a middle ground. I don’t save our change jar proceeds for retirement — we either earmark the cash for date night or put it into our Christmas gift fund. Sometimes I am content to cut out “everything” (which I put in quotation marks because as a middle-class American, I’m rich by the world’s standards even when I feel I’ve eliminated all my luxuries). Other times I simply must have a latte, and I go ahead, and figure I’ll start again the next day.

Are you good at stashing away “extra” funds? Do you have a failsafe savings strategy? Do tell …

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