Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
I was going to add to a previous, earlier post, but decided to just post new. Story-
A few years ago, one of my 6 kids called and said her car was dying and she needed a new car but couldn't afford payment. I asked her what the payment would be(used car) and she said around $300 per month. I know how much her and husband earn, so I found this hard to believe.
I told her I'd help her out on one condition. Prior to the help, I wanted her to carry a small ledger book in her purse, and write down every single expense she had for 30 days. She agreed. Utilities, house, clothes, fast foods, movies- popcorn etc.etc etc.
She called after a couple weeks and said"I don't want to do this any more". She had realized that she had spent almost $200 on just crap! Movies, 7-11, fast foods, coffee and doughnuts, her husbands' paper, and on and on.
They made some changes, got another car and learned something about budgets. If you don't think you have any money for investing, I'd suggest you try the same ledger for a month. My guess is, you'll be shocked at the waste. Rich
On this same topic, there are a couple of authors who wrote about this in their books.
One of Rich Weese's recommendations (and now mine too): "The Truth About Money" by Ric Edelman has a section dedicated to this topic.
Another book has a chapter called "The Latte Factor": "The Automatic Millionaire" by David Bach. Here is a snippet from that book chapter (sorry, I'm not shouting, the book uses bold uppercase for this statement):
"... MY LATTES ARE COSTING ME NEARLY TWO MILLION DOLLARS!"
[said by class attendee upon discovering that $5 per day could add up to $1,742,467 - if placed into 401K with 50% employer match, 10% annual rate of return]
And this is also from the Bach book:
USE THE POWER OF THE LATTE FACTOR
$5 (average cost of a latte and a muffin) x 7 days = $35/week = approx. $150/month. If you invested $150 a month and earned 10% annual return, you'd wind up with
1 year = $1,885
2 years = $3,967
5 years = $11,616
10 years = $30,727
15 years = $62,171
30 years = $339,073
40 years = $948,611
That same chapter also has a great table of "The Time Value of Money", as well as a form that is to be used to log daily spending (like what Rich recommended in his post).
I was spending 180 bucks a month just eating out for lunch (I have expensive taste)!
I was recently able to get a mini fridge for my shop and now I make my lunch everyday unless my boss is buying. Until I start making some big bucks I'll have to sacrifice.
I also recomend regularly going through your online statement and looking for what I call "leeches". Remember that free service you signed up for and maybe bought an item with via credit card (or check card) six months ago? Me neither! Now a days most of you know, if you fill out credit card info online chances are VERY good that you just signed up for a monthly subscription to some BS service you won't use and didn't notice you signed up for it.
Back when I worked for a salary (which was a very long time ago), I had to listen to my co-workers wonder how I could possibly afford to buy real estate when they couldn't even buy a house for themselves to live in. They all rented.
I pointed out that they ate out 2 nights a week, they bought lunches every day, their wives had lots of expensive clothes and had their hair and nails professionally done, they went out drinking in bars, and they owned at least two nice new cars.
They never did get it. They continued to live the same way and continued to complain because I was buying real estate and they couldn't afford to.
Along the same lines, I check all (wife, me & kids) cell charges very closely each month. I find unnecessary charges from time-to-time which usually can be removed with a phone call or blocked to prevent future expenses as they will linger for months under the radar unless checked ....
On this same topic, there are a couple of authors who wrote about this in their books.
One of Rich Weese's recommendations (and now mine too): "The Truth About Money" by Ric Edelman has a section dedicated to this topic.
Another book has a chapter called "The Latte Factor": "The Automatic Millionaire" by David Bach. Here is a snippet from that book chapter (sorry, I'm not shouting, the book uses bold uppercase for this statement):
"... MY LATTES ARE COSTING ME NEARLY TWO MILLION DOLLARS!"
[said by class attendee upon discovering that $5 per day could add up to $1,742,467 - if placed into 401K with 50% employer match, 10% annual rate of return]
And this is also from the Bach book:
USE THE POWER OF THE LATTE FACTOR
$5 (average cost of a latte and a muffin) x 7 days = $35/week = approx. $150/month. If you invested $150 a month and earned 10% annual return, you'd wind up with
1 year = $1,885
2 years = $3,967
5 years = $11,616
10 years = $30,727
15 years = $62,171
30 years = $339,073
40 years = $948,611
That same chapter also has a great table of "The Time Value of Money", as well as a form that is to be used to log daily spending (like what Rich recommended in his post).
Somewhere, maybe Edelman Book, I read the same type of thing. The author calculated how much was spent over a lifetime smoking cigarettes. If you took the same amount and saved it, you'd have X amount over time. If you'd have bought Phillip Morris STOCK, instead of their cigarettes, you'd have a lot more. And, if you'd had bought options on the stock, it was an even crazier amount.
People do spend a lot on stuff and aren't even aware of it. Rich
I still reccommend The Truth About Money by Ric Edelman. It will help you understand the importance of keeping your spending under control and how much it means to spend carelessly. Read it if you haven't. Rich in FL.
We're more in agreement on the Edelman book, I think.
Here, I was just bringing into play yet another author - David Bach - who focuses on addressing the bad spending habits; whereas, Edelman's book covers investments and provides a good and broad education on that. Edelman dedicates a small section of his book to the topic of your original post; Bach dedicates an entire book to it.